grahamc Posted October 3, 2006 Share Posted October 3, 2006 Good day all, Looking for some advise... As some of you know, I moved here from SouthAfrica, I have been working in permanent positions for 2 years, almost. Basically I am considering moving to contract work. I am a SQL DBA by trader. My fiancee has a good permanent position at Sky, so we are sorted for the minimum income per month. Also the supra is going paid for, so there is no selling of the car!!! I worked as a contractor in South Africa, but have no experience of the contract market here. What the things that I need to look out for tax wise, etc. I believe that I have to go through an umbrella company, is that right? Any advise is greatly appreciated! Graham Quote Link to comment Share on other sites More sharing options...
paul_y3k Posted October 3, 2006 Share Posted October 3, 2006 hi mate , I started contracting 6 months ago .... doing app support at the moment and loving it. You dont HAVE to go via an umbrella at all - you can set yourself up as a ltd company and dodge some of the tax that way. at the moment i do use an umbrella as I first wanted to get some experience and work out whats what. the best thing to do is find an acountant who deals with it conttractors and go see them. also I use linked in.com for contacts and get a few leads a month via it. Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 3, 2006 Author Share Posted October 3, 2006 thanks for that. I am going to stay with my company for this year, as I have a lot interesting things coming up, big upgrade, new servers, datawarehouse, etc. Definitely keen start my own company, where can read up on the requirements?? Quote Link to comment Share on other sites More sharing options...
The Restorer Posted October 4, 2006 Share Posted October 4, 2006 http://www.giantgroup.com/ give you quite a few options including umbrella and limited company. I'm working outside of the UK so they won't work for me, however they do come recommended. Professional Contractors Group website also has plenty of details including contract reviews. Hope this helps, Moaeed Quote Link to comment Share on other sites More sharing options...
Supragal Posted October 4, 2006 Share Posted October 4, 2006 I'd use an umbrella from what I hear it's far easier! Quote Link to comment Share on other sites More sharing options...
michael Posted October 4, 2006 Share Posted October 4, 2006 http://www.parasolit.co.uk/it/ - I used to work with a chap that now works for them, Chris Dwyer - he'll look after you Not sure what the market is like now but back in the day I used to pay SQL DBA's £40 an hour and couldn't get enough of them. Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 4, 2006 Author Share Posted October 4, 2006 http://www.parasolit.co.uk/it/ - I used to work with a chap that now works for them, Chris Dwyer - he'll look after you Not sure what the market is like now but back in the day I used to pay SQL DBA's £40 an hour and couldn't get enough of them. Depending on skill level, location, etc the range is around £200 - £400. Quote Link to comment Share on other sites More sharing options...
Ark Posted October 4, 2006 Share Posted October 4, 2006 I'd use an umbrella from what I hear it's far easier! No headaches that way, and you're guaranteed to be outside of IR35. Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 4, 2006 Author Share Posted October 4, 2006 Whats an IR35?? What sort of percentages to umbrella companies take?? Is that before tax?? Quote Link to comment Share on other sites More sharing options...
Ark Posted October 4, 2006 Share Posted October 4, 2006 Whats an IR35?? IR35 is the governments way of raping contractors who are doing well for themselves. Basically it's to stop contractors working for the same employer for years and years, making big bucks, and basically being disguised employees, which the employer doesn't have to pay taxes on or something. With an umbrella company, you are technically employed, not actually a true contractor, so are outside of IR35. Or you can make sure you spread your services over several companies across the year. YOU NEED TO READ UP ON THIS, IT IS IMPORTANT IF YOU GO CONTRACTING What sort of percentages to umbrella companies take?? Mine takes 2% before tax (the fee is tax deductable, making it closer to 1% in the end) Is that before tax?? see above. Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 4, 2006 Author Share Posted October 4, 2006 IR35 is the governments way of raping contractors who are doing well for themselves. Basically it's to stop contractors working for the same employer for years and years, making big bucks, and basically being disguised employees, which the employer doesn't have to pay taxes on or something. With an umbrella company, you are technically employed, not actually a true contractor, so are outside of IR35. Or you can make sure you spread your services over several companies across the year. YOU NEED TO READ UP ON THIS, IT IS IMPORTANT IF YOU GO CONTRACTING Mine takes 2% before tax (the fee is tax deductable, making it closer to 1% in the end) see above. Makes sense, thank you! Definitely going to do some reading up on this. Do I have to start filling out full tax returns? Or is it simpler to just pay someone to do it for me? Which is what I used to do in SA, and well worth the money at the end of the day. How is tax paid then? Does the company pay you, or your umbrella company? Do they deduct tax or do you pay it in lump sums? Is it up to you the individual to pay the tax at the end of the day? Quote Link to comment Share on other sites More sharing options...
Ark Posted October 4, 2006 Share Posted October 4, 2006 Makes sense, thank you! Definitely going to do some reading up on this. Do I have to start filling out full tax returns? Or is it simpler to just pay someone to do it for me? Which is what I used to do in SA, and well worth the money at the end of the day. How is tax paid then? Does the company pay you, or your umbrella company? Do they deduct tax or do you pay it in lump sums? Is it up to you the individual to pay the tax at the end of the day? The whole purpose of an umbrella is to do all that for you, so you get paid your monthly due, they do ALL the tax, NI, employers NI, blah blah blah. You even get a P45 at the end of it all. You can do a tax return if you really want, but it's not necessary - worth giving your tax office a call to ask the question, they're actually quite helpful as long it's not around April (busy season). Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 4, 2006 Author Share Posted October 4, 2006 So basically, you would be working for the umbrella company and they can be classified as a contracting house, almost, except you need to find your own work. Must get taxed a sh!tload!! Are you able to right off expenses and so forth? Quote Link to comment Share on other sites More sharing options...
paul_y3k Posted October 4, 2006 Share Posted October 4, 2006 I use parasol IT as my umbrella .. very good and they have a great customer services line. i gave them a call when i was starting and there were able to tell me what my retention figure would be and also offer advice on expenses. Its not like the good old days though, you cant claim for everything anymore that might be remotly connected to your business .. but you can get quite a bit. if you go the ltd compnay way and pay yourself a minimum wage and make the rest up in dividends, dont pay yourself less than 22G a year. 22G is the salary of a jnr tax man and so anything less is noticed apparently ! Quote Link to comment Share on other sites More sharing options...
Simon Posted October 4, 2006 Share Posted October 4, 2006 I would recommend researching on the PCG website, not all umbrella companies are the same and may not protect you from ir35. the contract wording is very important so take you time and read up first. Quote Link to comment Share on other sites More sharing options...
Jake Posted October 5, 2006 Share Posted October 5, 2006 Talking of contracting, I've just seen a local job on a 18 month contract that seems my kind of thing but it says "position is to start ASAP and will pay £17.00 - £19.00 (Ltd) or £13.50 - £15.50 (Paye) per hour." WTF is Ltd? (I've never worked as a contractor before) £17 to £19 is pretty poor money for contracting, right? That's less than 40k! For contracting! I was on more than that as a permie last year. (before I got made redundant) Quote Link to comment Share on other sites More sharing options...
Bobbeh Posted October 5, 2006 Share Posted October 5, 2006 LTD is you're charging as/to a limited company, and PAYE if you use that system perhaps? Quote Link to comment Share on other sites More sharing options...
Jake Posted October 5, 2006 Share Posted October 5, 2006 So I'd have to start my own limited company if I wanted to pay sod-all tax like all the other contrators? Quote Link to comment Share on other sites More sharing options...
Bobbeh Posted October 5, 2006 Share Posted October 5, 2006 I guess, but then you have to work out all your tax at the end of the year.. whereas with the PAYE I guess its all sorted via that system and you pay for it as you go? Quote Link to comment Share on other sites More sharing options...
Nick Posted October 5, 2006 Share Posted October 5, 2006 Before the government decided to screw the contractors with IR35 you used to be able to set yourself up as a limited company. The company would invoice the client, you would pay yourself a reasonable salary which you were taxed on, and the rest would be paid as dividends. Now it's harldy worth contracting in the UK as you pay so much tax. You can offset this with expenses, such as digs and travel, but you're still only looking at around 66% retention. I've used Albany UK and can recommend them. They also assign you an accountant to take care of your tax returns. Read up before you decide to take the plunge and make sure it's the right move for you. Many people only see the hourly rate, and forget that you don't get paid leave, sick pay, pension plus other benefits some companies provide if you're perm. I wouldn't want to work any other way. I get paid well, travel, and don't get involved with office politics. If my boss is a pr*ck, I just leave and go somewhere else. Quote Link to comment Share on other sites More sharing options...
Nick Posted October 5, 2006 Share Posted October 5, 2006 Talking of contracting, I've just seen a local job on a 18 month contract that seems my kind of thing but it says "position is to start ASAP and will pay £17.00 - £19.00 (Ltd) or £13.50 - £15.50 (Paye) per hour." WTF is Ltd? (I've never worked as a contractor before) £17 to £19 is pretty poor money for contracting, right? That's less than 40k! For contracting! I was on more than that as a permie last year. (before I got made redundant) I've never seen pay advertised like that before At those rates you're much better off perm. Quote Link to comment Share on other sites More sharing options...
Nick Posted October 5, 2006 Share Posted October 5, 2006 So I'd have to start my own limited company if I wanted to pay sod-all tax like all the other contrators? You need to find a contractor friendly country. Quote Link to comment Share on other sites More sharing options...
Jake Posted October 5, 2006 Share Posted October 5, 2006 Cheers Nick. As a permy I used to get titsed-off (is that a word?) with contractor mates moaning about IR35 because I still paid more tax than they did. Seemed to me like they earned more than than I did, a lot more, so they /should/ be paying more tax. I'd not really be taking that a big plunge (as in risk) because I'm not working at the mo. I've been out of IT for the last year but if I can get a 'foot in the door' contracting I'll jump at it. I'm sure I'll either love it or hate it but what the hell, might as well give it a shot. Quote Link to comment Share on other sites More sharing options...
Nick Posted October 5, 2006 Share Posted October 5, 2006 Cheers Nick. As a permy I used to get titsed-off (is that a word?) with contractor mates moaning about IR35 because I still paid more tax than they did. Seemed to me like they earned more than than I did, a lot more, so they /should/ be paying more tax. I'd not really be taking that a big plunge (as in risk) because I'm not working at the mo. I've been out of IT for the last year but if I can get a 'foot in the door' contracting I'll jump at it. I'm sure I'll either love it or hate it but what the hell, might as well give it a shot. The limited company was a nice loop hole while it lasted. I see your point about earning more so paying more, that's fair enough. However the government and EU have made it so that you're effectively PAYE, but without the benefits of being perm. The whole point of contracting is to maximise your income so that it's worth the risk. No point moaning about it, either work to the new rules or go somewhere else. You've got nothing to loose mate, give it a go and see if you like it. The golden rule is always remember that agents are sharks, and only care about their margin. Quote Link to comment Share on other sites More sharing options...
grahamc Posted October 5, 2006 Author Share Posted October 5, 2006 Some good advise. At the end of the day, the additional experience and money around working on contract is what I am after. So I will spend sometime researching it all, see how my companies IT restructure goes and then decide. Quote Link to comment Share on other sites More sharing options...
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