contract work advise

[alec1975]

I have working full time (permanent) for over 8 years in IT industry, I have been thinking about moving into contract work but don’t know if it’s worth doing as I have got family and 2 kids.

I have come across a 6 month rolling contract with government health care company , they are paying around £250 per day but I will have to do total 80 miles (both ways) traveling every day.

Money wise it’s good, I will be taking at least 1k extra at home after tax. Don’t know if this contract will be extended after 6 month but the guy who is leaving, has been working there for around 24 months.

Is it worth considering this contract?

[russ_a]

I'd hang on for the next few weeks as the rumor is contracting is going to be killed off by Gideon in the Autumn statement.

[alec1975]

russ_a said:

I'd hang on for the next few weeks as the rumor is contracting is going to be killed off by Gideon in the Autumn statement.

?

[Magic919]

I'm not convinced that will happen.

[russ_a]

We will find out on the 25th (probably)

http://forums.contractoruk.com/general/110158-crac...

I've just signed up for 6 months with no option for parole so not not sure what my options are if it does happen!

[alec1975]

russ_a said:

I'd hang on for the next few weeks as the rumor is contracting is going to be killed off by Gideon in the Autumn statement.

Thanks for the heads up.

I have never done the contract work before so just doing online research on contract process. I came across this on one of the forum and i don't know if it’s a co incidence that my friend who has been doing contract work for long time, mentioned the same thing to me;

What you can do as a contractor:

- Being able to claim for travel between home and place of work;

- Being able to claim for lunch;

- Paying a low salary to avoid paying NIC and PAYE;

- Limiting income to avoid paying any personal taxes;

- Paying some of earnings to a spouse in the form of salary and/or dividends;

- Building up cash in the company and eventually withdrawing it paying just 10% tax.

Just wondering if this is a definition of loop hole by government and that’s why government is trying to bring new legislation (to stop people abusing tax system).

[bigunit00]

alec1975 said:

I have working full time (permanent) for over 8 years in IT industry, I have been thinking about moving into contract work but don’t know if it’s worth doing as I have got family and 2 kids.

I have come across a 6 month rolling contract with government health care company , they are paying around £250 per day but I will have to do total 80 miles (both ways) traveling every day.

Money wise it’s good, I will be taking at least 1k extra at home after tax. Don’t know if this contract will be extended after 6 month but the guy who is leaving, has been working there for around 24 months.

Is it worth considering this contract?

That is a rubbish day rate. You should be aiming for twice that at least given the risk you are taking on and the commitments you have. What are you earning paye? Where is the role based?

[98elise]

alec1975 said:

russ_a said:

I'd hang on for the next few weeks as the rumor is contracting is going to be killed off by Gideon in the Autumn statement.

Thanks for the heads up.

I have never done the contract work before so just doing online research on contract process. I came across this on one of the forum and i don't know if it’s a co incidence that my friend who has been doing contract work for long time, mentioned the same thing to me;

What you can do as a contractor:

- Being able to claim for travel between home and place of work;

- Being able to claim for lunch;

- Paying a low salary to avoid paying NIC and PAYE;

- Limiting income to avoid paying any personal taxes;

- Paying some of earnings to a spouse in the form of salary and/or dividends;

- Building up cash in the company and eventually withdrawing it paying just 10% tax.

Just wondering if this is a definition of loop hole by government and that’s why government is trying to bring new legislation (to stop people abusing tax system).

Thats not the whole story, you have missed corporation tax out. Contracting has some tax benefits, bit not as much as you are thinking, and dividends will also soon be taxed in a very different way.

The 10% tax is on money thats already been taxed, and is when you wind the company up. You can't just exit, pay 10%, and start another company.

[alec1975]

bigunit00 said:

That is a rubbish day rate. You should be aiming for twice that at least given the risk you are taking on and the commitments you have. What are you earning paye? Where is the role based?

This contract is near sussex.

Currently i am earning 50k before tax in permanent role.

Edited by alec1975 on Sunday 15th November 19:34

[bigunit00]

alec1975 said:

This contract is near sussex.

Currently i am earning 50k in permanent role.

i would be asking for £400-600 a day in same situation.

[alec1975]

98elise said:

The 10% tax is on money thats already been taxed, and is when you wind the company up. You can't just exit, pay 10%, and start another company.

Why do you have to pay 10% tax on on money thats already been taxed?

[Piersman2]

98elise said:

alec1975 said:

russ_a said:

I'd hang on for the next few weeks as the rumor is contracting is going to be killed off by Gideon in the Autumn statement.

Thanks for the heads up.

I have never done the contract work before so just doing online research on contract process. I came across this on one of the forum and i don't know if it’s a co incidence that my friend who has been doing contract work for long time, mentioned the same thing to me;

What you can do as a contractor:

- Being able to claim for travel between home and place of work;

- Being able to claim for lunch;

- Paying a low salary to avoid paying NIC and PAYE;

- Limiting income to avoid paying any personal taxes;

- Paying some of earnings to a spouse in the form of salary and/or dividends;

- Building up cash in the company and eventually withdrawing it paying just 10% tax.

Just wondering if this is a definition of loop hole by government and that’s why government is trying to bring new legislation (to stop people abusing tax system).

Thats not the whole story, you have missed corporation tax out. Contracting has some tax benefits, bit not as much as you are thinking, and dividends will also soon be taxed in a very different way.

The 10% tax is on money thats already been taxed, and is when you wind the company up. You can't just exit, pay 10%, and start another company.

That's a very one sided list of benefits, none of the cons are listed.

No workie, no earnie. So no pay for holidays, bank holidays or sick. Contractors must be amongst the healthiest workers in the world.

No pension, pay for it yourself from your company.

Accountant fees, someone has to put your books together for submission to HMRC, reckon on £1000 - 1500 minimum.

The travel from work to home... 45p a mile IIRC, not exactly gonna fill your bank.
£5 a day for food, your only claiming the tax on that , so about a pound a day better off, I don't even bother although some do.

Oh, and then don't forget the time between contracts. I've been lucky during my contracting career, but did once take a good few months to find another contract... gets a bit twitchy after a couple of months with no sniff of work.

However, I've now got a balance going where I put way 30% of invoices and for the last few years it's just about covered any of the various taxes my company or I pay, so use that as a ready reckoner for how much you can get out of your company after tax. But you've still got to pay for your pension, holidays, sick, etc... out of the rest.

[alec1975]

Piersman2 said:

That's a very one sided list of benefits, none of the cons are listed.

No workie, no earnie. So no pay for holidays, bank holidays or sick. Contractors must be amongst the healthiest workers in the world.

No pension, pay for it yourself from your company.

Accountant fees, someone has to put your books together for submission to HMRC, reckon on £1000 - 1500 minimum.

The travel from work to home... 45p a mile IIRC, not exactly gonna fill your bank.
£5 a day for food, your only claiming the tax on that , so about a pound a day better off, I don't even bother although some do.

Oh, and then don't forget the time between contracts. I've been lucky during my contracting career, but did once take a good few months to find another contract... gets a bit twitchy after a couple of months with no sniff of work.

However, I've now got a balance going where I put way 30% of invoices and for the last few years it's just about covered any of the various taxes my company or I pay, so use that as a ready reckoner for how much you can get out of your company after tax. But you've still got to pay for your pension, holidays, sick, etc... out of the rest.

Thanks

[Dr Jekyll]

Piersman2 said:

pension, holidays, sick, etc...

Once you start contracting it's surprising how quickly the notion of getting paid for not working starts to seem very quaint, even bizarre.

[creampuff]

Piersman2 said:

That's a very one sided list of benefits, none of the cons are listed.

No workie, no earnie. So no pay for holidays, bank holidays or sick. Contractors must be amongst the healthiest workers in the world.

No pension, pay for it yourself from your company.

Accountant fees, someone has to put your books together for submission to HMRC, reckon on £1000 - 1500 minimum.

The cons are not really cons. They pale into insignificance given that your take home pay is much, much higher contracting even taking into account no sick/holiday pay. Many contractors also make £2000pa off the flat-rate VAT scheme.

[Piersman2]

creampuff said:

Piersman2 said:

That's a very one sided list of benefits, none of the cons are listed.

No workie, no earnie. So no pay for holidays, bank holidays or sick. Contractors must be amongst the healthiest workers in the world.

No pension, pay for it yourself from your company.

Accountant fees, someone has to put your books together for submission to HMRC, reckon on £1000 - 1500 minimum.

The cons are not really cons. They pale into insignificance given that your take home pay is much, much higher contracting even taking into account no sick/holiday pay. Many contractors also make £2000pa off the flat-rate VAT scheme.

No, they are very real cons which are mitigated by accepting a contract rate high enough to cover them. Not every contractor is taking home pay "much,much higher" than permies get. And those that are tend to be working on short term, time limited projects.

But yes, Flat rate VAT scheme could be another pro. I just did a quick calc and reckon I make something in the region of £4k a year from it based on my current contract rate. But then I don't claim any VAT for any purchases or expenses I incur in the year either. Sometimes I make on the deal, sometimes I don't.

[hornetrider]

If you're on 50k perm there's no way I'd ditch that for 250/day as that is very low end. I'd be aiming for a role which offers 350 as an absolute minimum, more if you can get it.

[davepoth]

Yup, once you've taken all of the loss of benefits you get from an employer (mainly pension, but other things like private healthcare if you currently get that) and take into account the very real risk of not being in work for significant periods, that's really not enough of a pay bump.

[Eric Mc]

Home to work travel claims are not as straightforward as has been listed above.

Please read the decision on the case of Dr Samadian.

http://www.taxation.co.uk/taxation/Articles/2014/0...

[98elise]

alec1975 said:

98elise said:

The 10% tax is on money thats already been taxed, and is when you wind the company up. You can't just exit, pay 10%, and start another company.

Why do you have to pay 10% tax on on money thats already been taxed?

The money left in the company after expenses is gets subject to corporation tax (20%) When you close down your company and extract the remain cash then its taxed again at 10%.

If you are paying yourself a low salary then the remaining cash each year will be high, and you will get a nice fat CT bill at the end of the year.