Will contract rates increase to pass dividend tax increase to clients?

[IR36Contractor]

Is flat rate VAT going to be pretty much the only sweetener left for running a ltd co after the budget?

[northernladuk]

Is flat rate VAT going to be pretty much the only sweetener left for running a ltd co after the budget?

You think flat rate is a sweetener??

[TheFaQQer]

Is flat rate VAT going to be pretty much the only sweetener left for running a ltd co after the budget?

I doubt it.

[WordIsBond]

Back to the original question, I just agreed a two month extension, 60-80 hours a month, with a 4% increase. Not sure yet how my others will go, or even if they'll be extended at all.

Someone once said, "Ye have not because ye ask not."

[Willapp]

Must admit I haven't read all the previous posts, but I don't see how anyone can think that clients will just bend over and take a rate increase for something that really isn't any of their business. What our overheads are as contractors is irrelevant to the client - it's no different to if PI/PL insurance rates suddenly increased, you wouldn't expect to just be able to pass this onto a client or certainly not by saying "well my insurance has gone up so up goes my rate".

Bottom line is that rates are set by supply and demand across the market, so of course you can pitch for higher rates but as soon as they find someone with broadly similar skills who's willing to work for less, your reasons for wanting a rate increase won't mean squat, they'll just go elsewhere.

The only reason I would approach my client about a rate increase is if I've been with them for say 12 months or more and could demonstrate that my value to their business has increased and they've seen that I deliver a high quality of work.

[dogzilla]

Yes but we aren't talking about individuals are we, we are talking about an entire industry being hit with the same tax increases.

I would expect that most would seek to pass those costs onto their clients which in the medium to long term should see rates rise to compensate.

[northernladuk]

Yes but we aren't talking about individuals are we, we are talking about an entire industry being hit with the same tax increases.

I would expect that most would seek to pass those costs onto their clients which in the medium to long term should see rates rise to compensate.

Industry isn't being hit. The people are. This is a personal tax...

And it's not an industry, it's anyone that has enough shares....

And What Willapp Said.

[Bluenose]

OK

'I am a business and decided to put my rate up by 8%.'

Happier now ?

[Willapp]

OK

'I am a business and decided to put my rate up by 8%.'

Happier now ?

Which you're perfectly entitled to do. My point is that justifying this to a client by saying that your *personal* tax liabilities have increased isn't going to get you anywhere. Then there's still the risk they just say, thanks but no thanks, and find someone cheaper.

[WordIsBond]

Which you're perfectly entitled to do. My point is that justifying this to a client by saying that your *personal* tax liabilities have increased isn't going to get you anywhere. Then there's still the risk they just say, thanks but no thanks, and find someone cheaper.

True. But all it takes is a few contractors to decide it isn't worth it anymore, a few who are in a good position to put up their rates (they don't have to give a reason, they just have to say what their rates are), and the inevitability of supply and demand kicks in, dragging rates up at least marginally.

I'm not telling my clients, "Oh, my rates are going up because the Chancer hit me with a dividend tax." They'd laugh. I'm just saying, "I'm increasing my rates by 4%, effective April, cost of doing business has increased." If someone pushes back, I'll happily settle on 3% and grudgingly go to 2%. If they can't handle any increase, someone else will. Next year (depending on what happens) or the year after, I'll increase again.

Too many contractors have the permie mindset that the boss sets the salary. You run a business and you set the rate at which you will provide its services. If you increase your rates by 3%, and they are happy with the quality of the service you've provided, few clients are going to say, "Oh, let's take a chance on some other guy who is 3% cheaper."

If they find a way to force me into IR35, then I'll be passing through a bigger increase and saying why -- this idiot government is making a mess of my kind of business and I can't provide the service I've been providing at the price I provided it in the past. If you don't like that, maybe you should take it up with the government.