Contracter Advise required
Discussion
Hi guys,
I was made redundant last week and have been job hunting like an absolute demon. Initially I wasn't considering contract work, only permanent but with a few contractors suggesting I look closer into it I have come back with some serious thinking to do.
A couple of big companies have got back to me keen on interviewing me for a contract role, similar to what I have done for the last year job wise. However, having never contracted before I am looking for advice.
They are offering £25/h which is more then I am on currently, but I have no idea what I would see at the end of the month from that amount. Until I can work that out I am unable to compare jobs like for like effectively. Pension Wise/Student loan wise need to be taken into account separately as well.
As I only have 2 years experience as an Automotive Engineer, I would be totally up front & honest in the job interview to make it clear they don't expect me to blow their minds experience wise, but I can & do make up for that with hard work, lust for knowledge and a real driven to do well at what I do.
All advice would be very gratefully received!
I was made redundant last week and have been job hunting like an absolute demon. Initially I wasn't considering contract work, only permanent but with a few contractors suggesting I look closer into it I have come back with some serious thinking to do.
A couple of big companies have got back to me keen on interviewing me for a contract role, similar to what I have done for the last year job wise. However, having never contracted before I am looking for advice.
They are offering £25/h which is more then I am on currently, but I have no idea what I would see at the end of the month from that amount. Until I can work that out I am unable to compare jobs like for like effectively. Pension Wise/Student loan wise need to be taken into account separately as well.
As I only have 2 years experience as an Automotive Engineer, I would be totally up front & honest in the job interview to make it clear they don't expect me to blow their minds experience wise, but I can & do make up for that with hard work, lust for knowledge and a real driven to do well at what I do.
All advice would be very gratefully received!
I think you will find lots of contractors started out like this
At your age I'd go for it, as you are finding, thats the way the market is going and even if you don't take to it, it keeps your CV up to date.
You can try it out initially by working for an Umberella company who will deal with the legalities, PAYE / NIC payments etc - worth speaking to them to get an idea of the amounts you would receive net from the hourly rate. One thing to bear in mind is that the Employers NIC payments will need to come out of that rate.
If you get a taste for it, then you can look at running your own Ltd company which gives you more control and lower overheads
At your age I'd go for it, as you are finding, thats the way the market is going and even if you don't take to it, it keeps your CV up to date.
You can try it out initially by working for an Umberella company who will deal with the legalities, PAYE / NIC payments etc - worth speaking to them to get an idea of the amounts you would receive net from the hourly rate. One thing to bear in mind is that the Employers NIC payments will need to come out of that rate.
If you get a taste for it, then you can look at running your own Ltd company which gives you more control and lower overheads
Edited by Burrow01 on Thursday 15th November 19:30
Edited by Burrow01 on Thursday 15th November 19:31
I am set up as a LTD company and operate as a contractor, not the same field as you but that's of no consequence.
You can either go the LTD company route and set yourself up which costs £16, or you can use an umbrella company, or some employers will pay contractors via PAYE, but that is unusual and sort of defeats the purpose of contracting.
There are many companies that will act on your behalf in an accountancy capacity (I use Paystream and would recommend them). If you look on the Paystream website you can see the various options available to you, I think it starts form £75 a month, although that is tax deductible.
You can expect to keep more of your gross by either going LTD or using an umbrella, the total that you Net will be dependent on a number of factors (including IR35), but you will keep more of your gross that if you work PAYE, which is good, also contracting will be good for your CV as chances are you will be getting a much more diverse set of experience.....But remember that you wont be getting an pension contributions, holiday pay, sick pay, and job security is fragile, Also if you are planning on wanting a mortgage in the near future it is very hard to get one without at least a year of accounts if you are self employed, which you are if you are contracting.
Personally I would recommend contracting, I wish I had started contracting years ago rather than working in a job and for a company that I didn't like for several years, but its different for everyone. If you are out of work anyway I certainly wouldn't discard contract roles off hand, If you are not sure if you want to do it long term and more specifically that you might be back in PAYE full time employment before next April 1st, I would suggest going the umbrella route rather than LTD, either way its not complicated to get set up.
ETA: I wouldn't just accept the first offer on the hourly rate, Regards Student Loan, if you are on an earnings related payment plan, it may be possible that you might not have to pay back a set amount depending on how you set yourself up.
You can either go the LTD company route and set yourself up which costs £16, or you can use an umbrella company, or some employers will pay contractors via PAYE, but that is unusual and sort of defeats the purpose of contracting.
There are many companies that will act on your behalf in an accountancy capacity (I use Paystream and would recommend them). If you look on the Paystream website you can see the various options available to you, I think it starts form £75 a month, although that is tax deductible.
You can expect to keep more of your gross by either going LTD or using an umbrella, the total that you Net will be dependent on a number of factors (including IR35), but you will keep more of your gross that if you work PAYE, which is good, also contracting will be good for your CV as chances are you will be getting a much more diverse set of experience.....But remember that you wont be getting an pension contributions, holiday pay, sick pay, and job security is fragile, Also if you are planning on wanting a mortgage in the near future it is very hard to get one without at least a year of accounts if you are self employed, which you are if you are contracting.
Personally I would recommend contracting, I wish I had started contracting years ago rather than working in a job and for a company that I didn't like for several years, but its different for everyone. If you are out of work anyway I certainly wouldn't discard contract roles off hand, If you are not sure if you want to do it long term and more specifically that you might be back in PAYE full time employment before next April 1st, I would suggest going the umbrella route rather than LTD, either way its not complicated to get set up.
ETA: I wouldn't just accept the first offer on the hourly rate, Regards Student Loan, if you are on an earnings related payment plan, it may be possible that you might not have to pay back a set amount depending on how you set yourself up.
Edited by big_boz on Thursday 15th November 20:29
So an umbrella company basically does ALL the paper work, insurance, tax and so forth for a fee of around £100 a month? The company you work for pay them, then they pay you?
Then alternatively...I go down a LTD company route I set up and do all the paper work, insurance, tax etc myself and save the £100?
Sorry for repeating, first time I have ever had to consider this...
Then alternatively...I go down a LTD company route I set up and do all the paper work, insurance, tax etc myself and save the £100?
Sorry for repeating, first time I have ever had to consider this...
Not at all, i found it quite daunting when i got set up originally.
I would suggest that if you are new to contracting and unsure that you go the full service umbrella route. This will cost you about £150 a month which sounds a lot, but they will take care of everything for you, they will prep your end of year accounts, sort out your expenses, review your contract for IR35 status, prep your monthly statements, even tell you what to leave in your bank account to account for your end of year liabilities. ie no worries at all for you. I started out this way then reduced my service down once i knew what the crack was, and i would recommend anyone new to contracting do the same. All you do is send them your time sheets and receipts and they will sort all your invoicing, and pay you every month.
If you are classed as "out of IR35" then you could end up retaining more than 80% of your invoiced charges, so considerably more than PAYE retention. One of the benefits of using a PSC to do your accounting is they will be able to review your contract and make sure it is as strong as possible regards IR35 status, you wouldn't be able to do this on your own unless you are a lawyer.
Now that is not to say that you couldn't do it all yourself and save the monthly charge, but if you have no experience of submitting to HMRC i wouldn't recommend it, you might end up landing yourself in trouble, also you might miss something that could benefit you. For instance you will be able to claim tax relief on all your mileage to and from the office you work in and your house as this is all classed as business mileage, and also tax relief on your lunches......
My suggestion would be that you give either Paystream or a PSC of your own choosing a call, they will be happy to run through all your options, at the end of the day they will be trying to get your business!
I would suggest that if you are new to contracting and unsure that you go the full service umbrella route. This will cost you about £150 a month which sounds a lot, but they will take care of everything for you, they will prep your end of year accounts, sort out your expenses, review your contract for IR35 status, prep your monthly statements, even tell you what to leave in your bank account to account for your end of year liabilities. ie no worries at all for you. I started out this way then reduced my service down once i knew what the crack was, and i would recommend anyone new to contracting do the same. All you do is send them your time sheets and receipts and they will sort all your invoicing, and pay you every month.
If you are classed as "out of IR35" then you could end up retaining more than 80% of your invoiced charges, so considerably more than PAYE retention. One of the benefits of using a PSC to do your accounting is they will be able to review your contract and make sure it is as strong as possible regards IR35 status, you wouldn't be able to do this on your own unless you are a lawyer.
Now that is not to say that you couldn't do it all yourself and save the monthly charge, but if you have no experience of submitting to HMRC i wouldn't recommend it, you might end up landing yourself in trouble, also you might miss something that could benefit you. For instance you will be able to claim tax relief on all your mileage to and from the office you work in and your house as this is all classed as business mileage, and also tax relief on your lunches......
My suggestion would be that you give either Paystream or a PSC of your own choosing a call, they will be happy to run through all your options, at the end of the day they will be trying to get your business!
doogz said:
I take home around 78% of my hourly rate by the time I pay CT/NI/PAYE, and make a few hundred quid a quarter on VAT. I charge at 20%, but only pay back 14.5%, you get to keep the rest.
My Halfords and B&Q trade cards that I procured with the relevant bits of company paperwork are a nice little bonus.
Forgot to mention Flat rate Vat scheme as Doogz has said, well worth doing, money for nothing, and the trade cards are also a cheeky bonus!My Halfords and B&Q trade cards that I procured with the relevant bits of company paperwork are a nice little bonus.
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