Different Payment Options – CIS/PAYE/LTD
CIS Payment method…
CIS stands for Construction Industry Scheme which is a set of special rules laid out by the tax office for handling payments made by contractors to subcontractors for construction work.
The Construction Industry Scheme (CIS) applies to contractors, sub-contractors and any organisations that have a high annual spend on construction, even if their main work isn’t in the industry. If your firm is involved in construction, it may need to register with HMRC under CIS.
When registering you need to indicate whether you’re a contractor or subcontractor as different rules apply to each category. Within each category there are separate terms that define your business.
https://www.gov.uk/what-you-must-do-as-a-cis-contractor/how-to-register
PAYE Payment method…
For most of our candidates, it’s taken directly from our payslips at the end of every week or month, all via something known as the Pay As You Earn system – or PAYE. If you’re not up-to-speed on all your tax-related terminology? Here’s a bit more information…
The Pay As You Earn system, often shortened to PAYE, is basically the process put in place that allows you to pay your income tax and National Insurance as you earn.
Your employer automatically calculates how much you need to pay, and takes it out of your pay packet before you get it (all calculations are documented in the payslip). They then send it through to HM Revenue & Customs (HMRC) and pay you the remaining amount from your salary.
Limited Company payment method…
The definition: Limited Liability – The notion that a company is only liable to the extent of its own capital and reserves.
If you set up your own limited company, you will become a company director. As one of over 2 million companies registered in the UK, you will have a number of statutory and financial obligations; you will have to submit annual accounts to Companies House (the registrar of companies in the UK), run the company solvently and responsibly, and meet your HMRC tax deadlines.
Fortunately, most of the work involved in running a company can be taken on by a specialist contractor accountant, although as a director you are responsible for meeting the company’s obligations. Most contractors operate via their own companies, and there are literally hundreds of contractor accountants in the marketplace who will be more than happy to show you the ropes.
One of the main benefits of contracting via a limited company is that it is the most tax-efficient way to operate. Unlike a PAYE or umbrella employee, you pay yourself in the form of a basic salary and the remainder is drawn down in the form of dividends.
Within Avenue we have a specialized in-house Payroll team and we’ll happily give you the right advice on each options…