State of the Market

[Ketto]

This is a forum for contractors so..... realistically what are people doing now/planning to do?

If this jumps by an extra 2% as is being touted and they lower the threshold what is the point..who is going to work to pay so much out in taxes each month...there surely a point where it isn't worth it...

eek

I haven’t done the sums, but does the suggested employer NI increase not just cancel the benefit of the previous employee NI reduction, rather than make umbrella contractors majorly worse off?

Sounds like the net effect of both changes means contractors will be a bit worse off, but not massively so?

[jamesbrown]

I haven’t done the sums, but does the suggested employer NI increase not just cancel the benefit of the previous employee NI reduction, rather than make umbrella contractors majorly worse off?

Sounds like the net effect of both changes means contractors will be a bit worse off, but not massively so?

Not exactly. The EeNI cut was in the starting rate, paid on income that is taxed at the basic rate of income tax, not the EeNI rate paid on income above the higher rate tax threshold (2%). However, ErNI has a single rate on all salary paid above the secondary earnings threshold, so an umbrella worker earning above the higher rate of income tax will pay whatever increment they add (e.g. 2%) on the full amount.

[Cookielove]

I haven’t done the sums, but does the suggested employer NI increase not just cancel the benefit of the previous employee NI reduction, rather than make umbrella contractors majorly worse off?

Sounds like the net effect of both changes means contractors will be a bit worse off, but not massively so?

Nope not so.

If they increase it by 2% then those via Umbrellas will pay the extra 2% on the full amount ....plus it will be an extra hit if she also reduces the threshold which is being strongly suggested.... so double whammy!

Brollies will be hammered....

[PerfectStorm]

If this jumps by an extra 2% as is being touted and they lower the threshold what is the point..who is going to work to pay so much out in taxes each month...there surely a point where it isn't worth it...

eek

This only makes sense if you look purely at the output tax but ignore the input value.

In other words, you'll be free to go and do your equivalent permanent job on a comparable tax scheme... for £40k a year.

Contracting is still a good idea for all those people who aren't put off by 'insecurity' and everyone else can stick to setting their quarterly goals and looking forward to quarterly town hall + pizza meetings.

[Cookielove]

Not so....I've zero interest in a free pizza or a town hall!

I've loved being a contractor as I don't like office politics, and all that goes with perm territory schmoozing the right people for bonuses/promos etc

However.....it is getting to the point of the law of diminishing returns...so much has been eroded VAT flat rate, travel from home can't be claimed, dividend tax rates, divi allowance...negligible outside roles...market flooded by so many people willing to work for rock bottom rates (thanks to crazy number of visas dished out)....it is SO far away from what the landscape was when i started out....the gains are minimal now in contracting to offset the "discomforts" as I'd call them of perm work....

Who knows ...but each to their own....when you look at your Umbrella pay slip as is then what it could be from today....it is a lot to swallow tax wise...if the Er NI comes in which seems a dead cert...

[jamesbrown]

It is true that that the tax advantage of being a contractor has largely diminished but it arguably never made sense to use the tax system in this way, and much of it was unintentional.

There's no particular reason that fewer employment rights should be traded for tax benefits. The benefits of contracting are in the lifestyle and flexibility afforded. The same applies to the tax system more generally. If you want to encourage entrepreneurs (and, let's face it, bum on seat contractors make a valuable contribution, but they are not entrepreneurs), then there are better ways to encourage this behaviour than using the tax system, notably laws/regulation.

There is almost an expectation that the quid pro quo for (no) employment rights is lower tax, but that is total nonsense. Umbrella workers (at least those on high pay) receive much higher compensation and are afforded much greater flexibility, on the whole, and that is why they work this way. If the trade-off has changed, then you're free to pursue regular employment. The real problem is with umbrella workers at the lower end who get no benefits whatsoever and front all the costs (which is why NHS nurses etc. ended up in avoidance schemes).

I say that as someone who wants lower taxes, in general, and less money invested in public services, but you've got to be realistic about the trade-off there too.

[Cookielove]

Totally disagree!!

You are paid more as a contractor because you have no job security, no employment rights nor any employment benefits - holidays, sick, pension, bonuses etc etc

The pay is more to compensate for the lack of all these things plus the uncertainty of the work duration...in a nutshell you earn more for the lack of certainty and add ons.

That excess is being eroded through more and more taxes (IR35, ER NI etc) and the pluses of contracting become less financially viable ....that is aside from whatever one's mindset is re perm work and what that brings...a different set of challenges not all monetary...

Contracting as was is dead and the future looks bleak...whatever way you cut it....successive govts have seen to that.

[jamesbrown]

Totally disagree!!

You are paid more as a contractor because you have no job security, no employment rights nor any employment benefits - holidays, sick, pension, bonuses etc etc

The pay is more to compensate for the lack of all these things plus the uncertainty of the work duration...in a nutshell you earn more for the lack of certainty and add ons.

That excess is being eroded through more and more taxes (IR35, ER NI etc) and the pluses of contracting become less financially viable ....that is aside from whatever one's mindset is re perm work and what that brings...a different set of challenges not all monetary...

Contracting as was is dead and the future looks bleak...whatever way you cut it....successive govts have seen to that.

I think you have a significant problem with reading comprehension. As I said above, you are paid more and enjoy greater flexibility. Tax has nothing to do with it (shouldn't have). The excess isn't being eroded by tax, primarily, it is being eroded by your skillset becoming commoditized and, ultimately, not worth very much. Yes, this is partly down to supply/demand and supply is partly down to immigration and offshoring, which I note that you enjoy banging on about. The same is true for all contract types, including permies.

[willendure]

WillEndure just joined the bench!

Current client is a small international that offers specialized training in software engineering. Spoke to the boss and sales are down to 30% of normal, so down 70%. I am not surprised at all, given my views on an approaching global recession.

Funny thing is, I'm excited about the... what next? Been contracting for 20+ years now, so I have put money asside for things like this.

[jamesbrown]

Been contracting for 20+ years now, so I have put money asside for things like this.

As it should be, but well done. You may end up being off the bench sooner than you thought, though - that is generally how it works when you don't absolutely need the next gig.