Changes to travel and subsistence

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Changes to travel and subsistence - are you losing out?

Last updated on Thursday, August 18, 2016

Written by Alex Cadman

Are you a contractor working through an umbrella company? If so, you may have noticed that since 6th April of this year, you were no longer able to claim certain expenses due to the changes to Travel and Subsistence expenses.


Even if you incur a relatively average amount of travel or subsistence expenses during your contract, it all adds up. Not being able to claim Travel and Subsistence expenses could mean you are losing out on a significant amount of tax relief on a monthly and yearly basis, resulting in a lower take home pay.

My take home pay is lower than what it used to be because of the changes to Travel and Subsistence. What can I do?

To counteract the changes to Travel and Subsistence expense allowances through umbrella companies, consider switching to a different payroll service. One payroll option available that will allow you to claim Travel and Subsistence in most cases is a limited company. As a director of your own limited company, you can claim for many expenses; this includes being able to claim for Travel and Subsistence if you work outside IR35.

Because of the ability to claim expenses and receive tax relief in a legal and compliant way, many contractors with limited companies are able to receive 10-25% higher take home pay than contractors working via an umbrella company. Additionally, having a limited company gives you more control over your finances and demonstrates a higher level of professionalism and credibility than working through an umbrella company.

How do I leave my umbrella company to set up a limited company?

Moving from an umbrella company to your own limited company can be a seamless and stress-free process. If you wish to set up a limited company, simply inform your umbrella company that you will no longer require their services. Ensure that you check your terms of engagement with your umbrella provider in case there is a tie in period, and confirm with your agency if you wish to switch to limited mid-contract.

Once you inform your umbrella company that you no longer require their services, they will need to pay you all of your amounts owed including holiday pay.

Setting up a limited company is straightforward. Once you choose a contractor accountant, they should be able to set up your limited company through Companies House, help you set up your business bank account and register your company for PAYE and National Insurance contributions. Churchill Knight & Associates Ltd will do all of this for no up-front cost, and we will complete the registration of your limited company in 24 hours. We can also help register your company for VAT if you wish.

Churchill Knight offers a bespoke accountancy service with no tie in period. Choosing our service means you can receive the maximum take home pay legally available to you without having to worry about the hassle of too much administration and paperwork. For more information on what’s included in our service, visit our website UK Contractor Accounts.

I’m not sure if I work inside or outside IR35. What next?

If you are interested in setting up a limited company but are worried that the terms of your contract mean you will work inside IR35, don’t worry. There are tax status specialists such as Bauer and Cottrell who can check the terms of your contract and help you determine your tax status.

Your tax status will vary from contract to contract, so make sure you seek assistance from a tax status specialist for your contracts if you are unsure whether you will be working inside or outside IR35.

For more information on switching from umbrella to limited, contact our expert consultants on 01707 871622 for a free consultation. Alternatively, email us with any questions you may have via enquiry@churchill-knight.co.uk and we will be happy to assist.

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