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Can you afford to go perm or inside IR35?

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    Can you afford to go perm or inside IR35?

    We started discussing this on the State of Market thread, but it was really off topic.

    It started by me saying i cant really afford to go perm even if offered a 100K base salary

    My living expenses are 5K per month. That seems high, but i have a family of 5 to support and the figure includes a 2K mortgage payment.

    As a contractor outside IR35 I can comfortably clear 5K and have a few grand a month left over to save (or waste)

    I also work hard, much harder than the average contractors i see around me, so i tend to get extended more often than not.

    As a perm on 100K base (assuming i can get that) i would net about £5500 per month, inside IR35 on my current rate i would net about the same as that as well, assuming i took the same number of days off as a Permie does. Although I probably couldn't afford to take many days off if all i could find was inside IR35.

    Thats only £500 to spare, not much head room.

    I think it was SueEllen suggested extending mortgage terms and so reducing the monthly payment, that might be an option if i am forced to go perm, although my mortgage only has six years to run.

    #2
    And the point SueEllen and me would both made is that extending your mortgage term now (when you don't have a problem) would give you head room while still allowing you to over pay if you can afford it.

    Given that affordability might be an issue going forward I would be both fixing my mortgage rate (for 5 years) and extending the term to say 12 or 15 at the first opportunity but then continually overpay while you can.
    Last edited by eek; 20 December 2020, 10:29.
    merely at clientco for the entertainment

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      #3
      That's a good suggestion, eek.

      I haven't had a mortgage in years (I now rent) but my last mortgage was an offset and I shaved years off the term through a combination of savings and overpayments all knowing that I could pull both in if times got sticky.

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        #4
        Can you afford to go perm or inside IR35?

        yes, no problem.
        I can also do neither.

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          #5
          If you've got spare money each month at the moment, I'd definitely suggest overpayments. There might be a limit on this (e.g. 10% of the January balance per year), but that depends whether you're still in the original n-year period.

          When I was in London (1 bedroom flat), my mortgage was originally £600/month; I reduced that to £40/month by the time I left.

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            #6
            Originally posted by hobnob View Post
            If you've got spare money each month at the moment, I'd definitely suggest overpayments. There might be a limit on this (e.g. 10% of the January balance per year), but that depends whether you're still in the original n-year period.

            When I was in London (1 bedroom flat), my mortgage was originally £600/month; I reduced that to £40/month by the time I left.
            When was that??

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              #7
              I can afford to go perm or inside ir35 but it means moving outside London for me. Right now we spend about 4k a month, I'd probably want to get that down to 2-2.5k if I was perm. I already talked to my wife though and we are probably going to go back to my home country and just start a business there. Just can't make it work earning perm salary in London and I don't really want to commute or live outside London. I think all the WFH is going to die down in a year, I don't think it's a permanent change.

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                #8
                For most people, it won't be a choice that you'll get, post April 2021. Flip it around - can you afford not to?

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                  #9
                  I was reminded of this:

                  Minimum salary required in London: GBP500k? – FIRE v London

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                    #10
                    Originally posted by jamesbrown View Post
                    For most people, it won't be a choice that you'll get, post April 2021. Flip it around - can you afford not to?
                    Yep - the thing to remember is that clients don't like risk (and they really, really don't) it's very likely that inside IR35 or no PSC rules are likely to be the norm for most / all contracts post April

                    Only if they really cannot fill the requirement any other way will they use / allow outside IR35 resources.

                    And it's always best to prepare and assume the worst while hoping for the best rather than assuming the best and not being prepared for anything worse.
                    Last edited by eek; 20 December 2020, 15:56.
                    merely at clientco for the entertainment

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