Contracting - Lucrative or silly?

[Ray Singh]

I have been offered a twelve month contract and never having contracted previously, am a little apprehensive.
It is through a recruitment consultant and is paying circa £300/day. I have now been asked if I wish to go via an umbrella or limited company.

I wonder if anyone is available to advise on which way I should go and the pros/cons of each method. Is there a rule of thumb to show what sort of percentage each method would (legally) allow you to take home?

I do not want to loose my flexible way of working or holidays (as I have young children who need supervision in the long summer/Xmas and Easter hols).

The job is for a Project Manager in a technical/scientific role.

Are new contracts easy to come by? The current market would suggest not.

I am completely new to contracting, so please advise in Ladybird speak.

ETA: Oh and I would love to have a Porsche as all contractors do - dont they?

Edited by Ray Singh on Wednesday 5th March 12:30

[nickd01]

I'd start here:

http://www.contractoruk.com/

and
http://forums.contractoruk.com/accounting-legal/

Lots of info, calculators and so on.

[KamSandhu44]

I started contracting last year and looked in the whole umbrella and LTD thing.

Why would you want to pay an umbrella company to take some of your money? Going LTD is very easy and probably the best way to take home most of your money.

Get yourself a good accountant (SJD are quite good) and they will help you along the way.

[Ray Singh]

Thank you for the replies so far.

I have contacted a company called Brookson, who seem to be well knowledged about thier field.

I have asked for some calculations to be made on my daily rate in both the umbrella and ltd methods. I hope that they will be able to deliver this today.
The whole limited thing looks a nicer solution, tbh, but i am worried about the associcated paperwork - however, Brookson have offered this service - for a fee.

[KamSandhu44]

Ray Singh said:

but i am worried about the associcated paperwork

Thats what the accountant is for. I went through the same worry. I had a meeting with my acccountant and she explained everything and it really is simple. Most accountancy firms will give an online/ excel book keeping tool. You just fill it in and keep your receipts/ invoices, they do the rest. It really is simple.

[Planet Claire]

Slightly off-topic, I've just had a conversation with an agency yesterday about a contracting role (for 6 months), which would mean giving up my permanent job that I'm currently in. However, I am wanting to put my flat on the market very soon - how would having a month or so of contracting under my belt affect my ability of getting a mortgage? All things being equal, would the deals generally be the same as a permie or slightly worse?

Or would I just be better off moving house first and then going contracting?
Thanks

[Bullett]

I'd forget flexible working, most contracts I've seen (at least initially) are on site at the customer locations 8 hours a day.
Don't forget, no work, no pay so take a week off for a holiday = no money.

[essayer]

Planet Claire said:

Slightly off-topic, I've just had a conversation with an agency yesterday about a contracting role (for 6 months), which would mean giving up my permanent job that I'm currently in. However, I am wanting to put my flat on the market very soon - how would having a month or so of contracting under my belt affect my ability of getting a mortgage? All things being equal, would the deals generally be the same as a permie or slightly worse?

Or would I just be better off moving house first and then going contracting?
Thanks

I found that I was able to borrow a much higher amount when I went contracting but the amount of products available was far fewer, primarily because I had been contracting for less than a year. For most of the mainstream products you needed at least three years accounts.

So it really depends on your LTV, current salary etc.

[Shaoxter]

Went contracting a couple of years ago and never looked back, should have done it much earlier. Setting up a limited company is a no brainer really, one of the benefits of contracting is the advantageous tax rules. My take home pay almost doubled after accounting for holidays, pension, benefits, bonus, etc. There's loads of online contractor calculators you can use to work your take home pay.

I do my own accounts, payroll, VAT, etc. and while it's a little daunting at first, it's not too bad if you're organised (also helps if your wife is an accountant ). You could just pay someone £1k a year to take care of that stuff though.

There are mortgage brokers out there who look at your contract rate rather than previous accounts so it is possible to get a mortgage, especially if you have a long contract like 12 months. Some of them do it for free (they get commission from the lender) while others charge £500-1000 for the same service so shop around.

Another benefit of contracting is that you find your health dramatically improves since you hardly take any sick days

[blank]

Read up on IR35.

I don't know a huge amount about it but from the reading I have done, I'd say 95%+ of the 'contractors' I know (and I know a lot) are slap bang in the middle of IR35.

Not a risk I'd take personally.

[CRB14]

blank said:

Read up on IR35.

I don't know a huge amount about it but from the reading I have done, I'd say 95%+ of the 'contractors' I know (and I know a lot) are slap bang in the middle of IR35.

Not a risk I'd take personally.

And also check out PCG or QDOS who offer a range of services including contract reviews and IR35 cover.

[shirt]

best thing you can do is to get a recommendation for a good accountant in your area and go speak to them about what you plan to do.

i got my recommendation from the regional forum on here. went along to speak to the guy and he explained very clearly the options for setting up and the pros/cons of each. i ended up going the ltd route and used him during my time as a contractor.

you should also save the porsche dream for year 2 or 3. think of a number that you need to support your lifestyle and family for a sufficient length of time if out of work. get that banked before buying any toys.

[Planet Claire]

Thanks for the responses to my questions.

[SuperDude]

There's a post somewhere on here detailing the pros and cons of contracting. Breaks down all the costs to consider.

It's pretty much the greatest post on PH, ever.

I cant be bothered to search for it, but it'll be worth your time trying to find it.

(the thread starts in a similar fashion to this one, it's like the second post down)

[Shaoxter]

blank said:

Read up on IR35.

I don't know a huge amount about it but from the reading I have done, I'd say 95%+ of the 'contractors' I know (and I know a lot) are slap bang in the middle of IR35.

Not a risk I'd take personally.

It's easy to say that as a non-contractor but would you really leave tens of thousands of pounds on the table? What you have to realise is that you're a small fish in a big pond, and HMRC have way bigger fish to fry. How many of those 95% have been caught or even investigated by HMRC?

[Dog Star]

Bullett said:

I'd forget flexible working, most contracts I've seen (at least initially) are on site at the customer locations 8 hours a day.

Utter, total nonsense. IME you'll get treated the same as permies, but often with leeway on Mon/Fri and even IR35 friendly arrangements.

D.S. (contracting since 1992)

(In fact, come to think of it I've only had three fixed hours contract (ie. 9-5) - 1993,1999 and 2003)

[Terminator X]

Shaoxter said:

Another benefit of contracting is that you find your health dramatically improves since you hardly take any sick days

Really at that!

TX.

[otolith]

Shaoxter said:

Another benefit of contracting is that you find your health dramatically improves since you hardly take any sick days

In the event of a zombie apocalypse, you might want to move desks if you sit next to a contractor.

[Dog Star]

Terminator X said:

Shaoxter said:

Another benefit of contracting is that you find your health dramatically improves since you hardly take any sick days

Really at that!

TX.

That's very true. For myself in 22 years - zero days off sick.
I was once working for a major mobile telco and as I was driving into the car park I saw a bloke hobbling in on crutches with two legs in plaster. "I bet he's a contractor" I thought. I was right - the bloke is a Contracting Icon amongst me and my contractor mates

[celticstevie]

Too true on the sickness front, I dislocated my kneecap and never missed a shift, 25 quid each way in a taxi was better than loosing a day rate