Contractor wannabe

**TheFaQQer** · 27 May 2014, 08:34

Originally posted by CaffeineUseDisorder View Post

I estimate I'd need a min of 200 net per day (paying rent in London and all...).
What's the gross daily rate required to get this amount of net pay?

How are you going to be operating - umbrella or limited company?

If you are using a limited company, what salary level are you going to set, and how much are you planning on taking in dividends? What kind of percentage are you looking to save in the company? What kind of expenses are you likely to have? Are you planning on putting money into a pension, and if so how much? Will that be as employee or employer contributions?

Without knowing how you are likely to operate, any answer (apart from what an umbrella calculator) is pure guesswork.

**ChimpMaster** · 27 May 2014, 09:25

When I went contracting I held out for a rate and location that I was reasonably happy with. Actually the main reason I went contracting was because I was sick of being shipped around working for a consultancy and the next assignment lined up for me would have meant over a year away from my new home and my family. So the contract details were kind of secondary.

But anyway - £200 net:

As an example let's say you charge £450 daily rate.
Living/commuting costs around London, say £75/day (hotel and trains etc taken from pre-tax daily rate).
Leaves you with £375.
Then take off tax which will vary depending on whether you are Ltd (non-IR35) or PAYE. So anywhere from 30% to I dunno say 40%. The latter leaves you with £225/day net.

This is just a pie in the sky 2 minute calculation and clearly you need to see whether it's worthwhile you contracting and if you would enjoy the lifestyle/stress/challenge/opportunity. Remember, you get no benefits (holidays, sick pay, pension etc) and the risk is that you may not get work all year round, so you need to weigh this up before jumping.

My personal preference was to achieve at least 50% more net with contracting than I did in my permie role. This allows for the business risk, lack of permie benefits etc.

**LisaContractorUmbrella** · 27 May 2014, 09:38

If you work through an umbrella company or are inside IR35 then you would need to earn about £1700 per week to net £1000 - see below:

Monthly Weekly

Income 1700.00
Expenses

Employer's NI 184.26
Employee's NI 91.89
Employee Tax 395.56
Total All Tax 671.71
Umbrella Margin 27.50
Total Net Income 1,000.16

This assumes zero expenses - so your net would increase if you were entitled to tax relief on expenses and it assumes that you are on a standard tax code - the net would be different if you were not.

If you were outside IR35 you could draw dividends from your Ltd Co.

There's lots of info on the site about IR35 and working umbrella/Ltd - good luck

**northernladuk** · 27 May 2014, 14:47

4 years experience isn't much and contracting doesn't work on scales of rates v experience. You can either do the work they want or you can't. They don't tend to look for less experience people and pay less. I would say the rates you might be able to command are not the issue here. It's how long you are going to spend on the bench looking for work with that level of experience.

**CaffeineUseDisorder** · 30 May 2014, 22:03

Thanks

Thank you all for your responses. Very helpful indeed.

**vwdan** · 31 May 2014, 16:04

Do you have 4 years in IT overall, or more before consulting. My 3+ years in a consultancy has set me up nicely for contracting (Same work, similar lifestyle on the road) but I have 6 more behind that.

Unless you're doing something very special 4 years is second job territory. I was just out of 2nd Line support at that point

What sort of salary are you on, and what perks will you lose?

Contractor wannabe