Help with becoming a contractor!

**northernladuk** · 2 November 2018, 00:26

Originally posted by DJR View Post

Hi all!

I currently am a sole trader running my own business (unrelated to the contractor work I’m considering)

Basically my father wants to take me on in the building trade, I would prefer to be a contractor and set up a limited company to run this through with my wife as admin and paid a salary from this also.

My question is, what complications are there for my father in taking me on as a contractor? What extra steps does he need to take above the cash in hand employees that many in this field take on (but shouldn’t)

I basically want to set myself up for a future being able to get a mortgage etc.

I’m pretty happy dealing with my end of the business and would assume this would be beneficial to him as he can use my wages as expenses on his tax bill.

Any help appreciated!

How much are we talking here?

**Scruff** · 2 November 2018, 09:05

I would suggest that if you are going to be taking work on for your father's business, you do so as a Sole Trader (if you don't need the Limited Liability). If he decides to make you a partner / shareholder in his business at a later stage it is easier than closing down a Limited Company.

Open up a banking account named "Joe Schmoe T/A Joe's Garage".
Ask your Dad's accountant to do your books as he does for your Dad
Get Public Liability Insurance
Get Professional Indemnity Insurance
Join the CIS (if that is what it is still called?)

**DJR** · 2 November 2018, 19:31

Thanks for the replies.

I’ll be on a day rate which isn’t that much, between £100-150 a day to begin with.

I’m wanting to get a mortgage in the next year or 2 and speaking to a mortgage advisor I was told that being a contractor on a day rate would make it easier (something about a contract for a day rate needing less time than the 3 years of tax returns for self employed)

My dads business is a sole trader, the idea around setting up a limited company and paying myself and my wife a salary is that the income is fixed each month and should make the mortgage affordability easier.

For example - the business takes £35000 a year from the contract work for my dad, me and my wife both get paid from this, £10k for her £25k for me. Any other work undertaken is then paid in dividends. That way we have £35k per year to go towards the mortgage affordability alongside my earnings from my other sole trader business.

I’m not expecting to become part of my dads business in a partnership. I’ll almost certainly always be contracted in for work on a day rate.

**Lance** · 3 November 2018, 09:05

I’m not convinced that a mortgage is easier to get for a contractor.
Having a 20% deposit and a permanent job would be far more help IMO.

**DJR** · 3 November 2018, 10:30

Originally posted by Lance View Post

I’m not convinced that a mortgage is easier to get for a contractor.
Having a 20% deposit and a permanent job would be far more help IMO.

I had a dencent permanent job but given my future plans getting a permanent job isn’t going to be practical.

What I was told is that as a contractor on a day rate I would only need a years worth of income to be approved for a mortgage, whereas a fully self employed builder would need 3 years tax returns. I think this is because a self employed builders income could vary massively, whereas me as a contractor on a day rate means I’ll earn a set sum over the year

**northernladuk** · 3 November 2018, 17:51

Originally posted by DJR View Post

I had a dencent permanent job but given my future plans getting a permanent job isn’t going to be practical.

What I was told is that as a contractor on a day rate I would only need a years worth of income to be approved for a mortgage, whereas a fully self employed builder would need 3 years tax returns. I think this is because a self employed builders income could vary massively, whereas me as a contractor on a day rate means I’ll earn a set sum over the year

Not really. Each lender has their own criteria. The lenders have gotten much better at understanding different working methods. There are plenty of good options for contractors for example.

I would suggest you speak to Freelancer Financials about what products would be possible for you. I expect you'll find you don't need to change your employment model just for mortgage purposes nowadays... Unless it's that cash in hand one of course.

**DJR** · 4 November 2018, 12:39

Originally posted by northernladuk View Post

Not really. Each lender has their own criteria. The lenders have gotten much better at understanding different working methods. There are plenty of good options for contractors for example.

I would suggest you speak to Freelancer Financials about what products would be possible for you. I expect you'll find you don't need to change your employment model just for mortgage purposes nowadays... Unless it's that cash in hand one of course.

Thanks, I’ve been looking at freelancer financials and it’s where I obtained the information I did, the basics as I understand it are that after a year there are mortgage companies that will take my day rate and apply multiples to come up with a figure they can lend me rather than submitting 2/3 years returns which will be better for me as I’m just starting out.

I’ll be paid a day rate (plus profit share on some bigger jobs) seems that it can only be beneficial to be a contractor on this. I suppose the choice of limited company or sole trader are what I need to look at, my other business is sole trader and this seems to be the easier option,

**webberg** · 5 November 2018, 10:27

I would observe that perhaps your focus is not in the right place at the moment?

You should be focusing on the job and its prospects now and in the future.

Then the likely tax (income tax, VAT etc) issues.

Then the various regulatory issues that may require action.

Then, once you are set up and have run for a period, the mortgage.

Get the first three right and the last will fall into place.

I suggest that you start by asking your Dad's accountant for advice.

Help with becoming a contractor!