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First time contractor - Decisions to make

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    First time contractor - Decisions to make

    Hi,

    I am new to this forum and contracting as I have never done it before. I have always been a permanent employee but always worked with Consultancies so I figured why not branch out.

    The perfect role popped up out of the blue and I went for the interview and have received an offer. I cannot ask anyone obviously to make a decision for me but here are a few questions I cannot answer.

    1. Expenses for the role would be very high as I would have to stay away from home and pay for it, with my consultancies I just claim it back every other week so never out of pocket. How do I pay for such high expenses as it would probably wipe out anything I make weekly.

    2. If it is inside IR35, and I go with Umbrella will I them pay expenses out of my own pocket and have to take it off my take home calculations.

    3. If inside IR35 and I take home is calculated at £4000 per month after the various taxes, is there anything else I need to take off?

    Sorry for the long question, I am genuinely in so many minds as to what to do.

    #2
    You are now responsible for all your expenses and you'll need to factor those in to your rate expectations.

    If you're inside IR35 under the rules from 6 April you won't be able to get tax relief on expenses as, IIRC, the 5% rule will no longer apply.

    If you're with an umbrella, all your taxes will be dealt with for you. You will pay apprentice levy and employers NI on top of your usual taxes.

    If you're inside IR35 and on agency/client PAYE then you should only pay employees NI and income tax. Again your taxes will be deducted at source.

    Worst time to go solo IMO. Good luck.

    Comment


      #3
      As Ladymuck says, it's not a good time to go consulting, but there are ways to reduce expenses - if you're taking a train or flying, don't sit up front and work out the best time to buy tickets or to travel. Don't stay in a 5* hotel, particularly if you're somewhere that has B&Bs or pubs nearby. Discuss rates in person with the B&B/Pub. Or if there are other contractors on site, consider a flat/house share.

      Good luck
      {emotionless greeting}

      Three Word Slogan

      Comment


        #4
        You have to pay all the expenses out of your own pocket.

        As pointed out already, it's not the best time to go contracting but it still may make sense if you can find roles in your area where travel/overnight stays are not needed.

        Comment


          #5
          You are now a microconsultancy; YouLtd absorb the costs that BigFourCo probably get to pass on to ClientCo. If you're feeling brave, you could ask about expenses if your contract is inside IR35.

          Get used to living to take as much home as you can; I've contracted in London and stayed in student accommodation in the summer because it's "good enough". Get out of the habit of £100+ per night hotels and £30 meals. While they *can* be expensed, be mindful that it's still your bottom line that they're chewing away at.

          Don't bother renting a room or flat - you're tied in for at least six months but your contract can be pulled at any moment without notice (despite what you may think). You'll still be liable for the rent.
          Booking.com and Trivago come in useful. Trains - get used to travelling standard class off-peak. It can work out cheaper travelling late Sunday and staying over than travelling Monday morning.

          Consider driving occasionally to bump your mileage claim up; it's the most tax efficient way to travel on business but the most tiring, so there's a balance to be had.
          The greatest trick the devil ever pulled was convincing the world that he didn't exist

          Comment


            #6
            Have a look at the guides to the right, particularly the first timers guides and umbrella guides.

            This will answer your questions and give you a raft of knowledge about things you didn't know you need to know.

            And if echo the message about timings. One contract does not make you a contractor. It's the 2nd and 3rd and so on. You got lucky with the feist gig but the second is the most difficult. You'll be on the bench with no income fighting off pro contractors with 10+ years under their belt. It will be a very long and unhappy time.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Originally posted by northernladuk View Post
              Have a look at the guides to the right, particularly the first timers guides and umbrella guides.

              This will answer your questions and give you a raft of knowledge about things you didn't know you need to know.

              And if echo the message about timings. One contract does not make you a contractor. It's the 2nd and 3rd and so on. You got lucky with the feist gig but the second is the most difficult. You'll be on the bench with no income fighting off pro contractors with 10+ years under their belt. It will be a very long and unhappy time.
              In my experience the 2nd was easy to come by, then I spent months getting the third.

              Comment


                #8
                Originally posted by Femster View Post
                1. Expenses for the role would be very high as I would have to stay away from home and pay for it, with my consultancies I just claim it back every other week so never out of pocket. How do I pay for such high expenses as it would probably wipe out anything I make weekly.
                You charge a lot of money. That's how you cover expenses. If you aren't covering expenses plus income in your rate, you haven't priced the contract up properly.

                Originally posted by Femster View Post
                2. If it is inside IR35, and I go with Umbrella will I them pay expenses out of my own pocket and have to take it off my take home calculations.
                You can claim valid expenses from them - ask your employer what you can claim back. Chances are the answer is "nothing", but they may have some. For example, you should be able to claim travel to temporary workplaces such as a one day visit to a different site. But it's down to the employer so ask them.

                Originally posted by Femster View Post
                3. If inside IR35 and I take home is calculated at £4000 per month after the various taxes, is there anything else I need to take off?
                You can't take off very much these days. You'll be paying travel and subsistence out of that £4k yourself. You'll be paying for anything else. But at least you'll not have to worry about the complexity of IR35 any more
                Last edited by DeludedKitten; 18 February 2020, 10:14.
                I'm not fat, I'm just fluffy.

                Comment


                  #9
                  Originally posted by PerfectStorm View Post
                  In my experience the 2nd was easy to come by, then I spent months getting the third.
                  LOL ok ok smart arse. Always one isn't there LOL

                  But the theory still stands
                  'CUK forum personality of 2011 - Winner - Yes really!!!!

                  Comment


                    #10
                    First time contractor - Decisions to make

                    Originally posted by Femster View Post
                    Hi,

                    I am new to this forum and contracting as I have never done it before. I have always been a permanent employee but always worked with Consultancies so I figured why not branch out.

                    The perfect role popped up out of the blue and I went for the interview and have received an offer. I cannot ask anyone obviously to make a decision for me but here are a few questions I cannot answer.

                    1. Expenses for the role would be very high as I would have to stay away from home and pay for it, with my consultancies I just claim it back every other week so never out of pocket. How do I pay for such high expenses as it would probably wipe out anything I make weekly.

                    2. If it is inside IR35, and I go with Umbrella will I them pay expenses out of my own pocket and have to take it off my take home calculations.

                    3. If inside IR35 and I take home is calculated at £4000 per month after the various taxes, is there anything else I need to take off?

                    Sorry for the long question, I am genuinely in so many minds as to what to do.
                    Get it written into your contract that end client will pay your traveling and accommodation expenses - job done

                    If they say no (most likely) then raise your rate by expenses amount + tax (as you will be paying out of net income)

                    If you have 2/3/4 year old kids prepare to lose family allowance and 30 free hours of childcare also

                    Welcome to contracting


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