From Ltd. company to employee - is it worth it?

Question

I've been a self-employed contractor for nearly 5 years and have loved every minute of it. I'm now contracting at a company and am considering going permanent for personal and professional reasons.

From a financial point of view, are there any disadvantages to leaving my own Ltd company and becoming an employee (except tax etc)?

Answer 1

Are you sure you are a company?

Just because you are self-employed does not mean you are a company. If you have not registered at Companies House, you are a Business, which is different from a company.

If you are a Business, then there is no problems to consider, it is very easy to jump between the two, and you get the guarantee of income.

If you are a company, and you do want to leave your company status, you need to follow the company house directives on closure of a Limited entity, which involves a handful of forms.

Closing a company is a big thing. Make sure you know you want to do it, then request the closure forms from Companies house.

Answer 2

I used to be a Ltd. Company and am now an employee. Financially there is less freedom. I found that my tax bill increased (this depends on how good your accountant is) as I was able to write off clothing etc. against the business.

The upside is there is career progression, I earn significantly more now than when I was contracting (about 4 years ago). It depends on what you want (short term money or long term career).

I would also advise looking at what is happening in your industry, I work in automotive, when I made the decision there were the first signs of companies in trouble e.g. Rover and I predicted that supply of contractors was going to increase and demand was going to decrease as more companies moved development offshore. If there is little talk in your sector of outsourcing, China or former Soviet countries then it might be worth staying put.

A word of caution, I now get roughly 5 emails a day from agencies trying to place contractors. Good luck

Answer 3

I think the biggest disadvantage is the fact that you loose the ability to pay taxes last and set your own schedule. As an employee taxes will likely be your largest expense. If you make the same as an employee that you do as a contractor you would come out behind in the end. Don't underestimate the tax consequences. Also you loose the freedom of being your own boss.

Answer 4

specific. As you're a director of a constrained corporation you at the instant are not classed as Self-employed. you're legally categorised an an worker of the constrained corporation. initially your £1000 dividend is susceptible to earnings tax. The £5,000 proffit is taxible meaning once you document your return you will ought to pay £950.00 company tax. in spite of the undeniable fact that in case you pay your self £4999 wages this might cut back your organization tax to 0 yet you will ought to pay earnings tax. the ease of leaving a 1p proffit skill while different businesses do a credit seek they generally use a difficulty-unfastened checklist which doesnt circulate into plenty component. It in basic terms says your bills are upto date and regardless of while you're in proffit, made a loss or broke even. i'm the director of a protecting corporation. An pay myself a dividend of ninety 9% of the proffit in line with annum.

Answer 5

No...but remember to keep your liability insurance running for a couople of years in case any one claims against what was you plc