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?

[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.

?

[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).

[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

[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?

[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

[alec1975]

Do i need to worry about IR35 or expenses if contracting under umbrella company?

[alec1975]

UpTheIron said:

And to echo other posters, I would not be ditching a £50k perm role in Suffolk (assuming you live there too) for £250/day. Not for financial reasons anyway.

Either you are way overpaid currently, or the contract role is too lowly or underpaid for you.

What is it you do?

Happy to offer as much advice as I can... speaking as a contractor of 15 years.

I am in IT (Software Developer).

I live in Berkshire and contract is near Brighton. My only concern is a long traveling though its a 6 month rolling contract.

Yes day rates are not that good.

[alec1975]

Jakg said:

50k a year is an effective £215 a day.

£250 a day at PAYE would be £58k. Ignoring the contracting aspect for a second, would you switch jobs and get an 80 mile commute for £8k/15% extra?

50k (before tax) is £192 a day as per http://www.thesalarycalculator.co.uk/salary.php

[alec1975]

Olivera said:

You need to factor in your pension and ~1 month paid holidays on top of your 50k per annum salary.

£250 per day minus travel expenses (and corporation tax, dividend tax etc) is probably going to result in you being no better off, but with a much more volatile working arrangement.

Avoid unless you can get a substantial increase in the day rate.

Thanks