New to contracting - contractors pay higher tax?

[NorthWestPerm2Contr]

Contracting locally for less than £250/day does not appear to be worthwhile and for less than £325-£350 away from home (or defo not less than 300) makes it seem pointless.

I know I am just entering the contracting world but after doing various calculations that's how it seems.

[nfoote]

for less than £325-£350 away from home makes it seem pointless.

It helps when you don't have a home

[Sally BFCA]

Hi I'm new to contracting / trying to break into contracting and am just trying to get an accurate picture of how much I'd potentially earn as opposed to a perm role. Pretty much everyone I talk to says to initially go with an Umbrella company so assume thats I'm talking about here...

As a perm I was on 35000/year and was getting checks for roughly 2100 in the hand. I had my calculator out and its roughly 134 quid gross per day.

I've been using the calculators on this website and plugging in say 200/day (25/hr at 8 hours a day), 52 weeks worked (since perm you could work 52 weeks and forgo holidays). Pretty simple maths tells you the gross for that is almost 20k more at 52000/year. Forgetting about things like umbrella fee and tax claims at the moment the calculators are saying thats only 2,557.92 in take home pay. Not that 2500quid a month is to be laughed at but the increase struck me as rather low compared to raw increase in daily rate, more than 65 pounds per day!

I know I'm glossing over several things like holidays/sick leave and tax claims etc etc but I was just wondering if contractors end up paying more in tax?
For example, perhaps, what perm salary in real life terms is 200/day comparable to?

Perhaps not being from the UK I'm missing something like a tiered tax system?

If you would like a chat about how it all works please feel free to call me. My contact details are on our website under my profile.

You can also download a comparison spreadsheet tool that will compare all your trading options, I would advise not to assume that as many contractors / freelancers start off contracting via an umbrella that it will be in your best interest. This tool is on our website also, "Ltd company V umbrella"

[SuperZ]

I think people are a little too an*l over just the money side of things. There are of course other advantages to contracting but it depends on the individual what they make of those advantages.

£250pd locally vs 35k pa locally, I know which one I'd prefer IF of course I can be fairly sure the contract will last 12months at least, and more often than not they do in my experience.

Besides, perm sucks ar** mostly, unless you find the perfect position with the perfect company and so forth

[HairyArsedBloke]

... flying you business class around the world and put you up in 5* hotels.

Good innit.

It's even better when you become the boss and you fly first class.

[NotAllThere]

what is your niche area?

AlreadyPacked? He's a helpdesk girl.

[cojak]

£250pd locally vs 35k pa locally, I know which one I'd prefer IF of course I can be fairly sure the contract will last 12months at least, and more often than not they do in my experience.

It's funny because I'll only take £250pd locally if it's only for 3 months, then I don't get locked into a crap rate.

So you see - it's up to you and your own priorities.

[BlasterBates]

Agree with that crap rates are fine as long as you don't lock yourself in, and you can bugger off when times get better.

[NorthWestPerm2Contr]

It's funny because I'll only take £250pd locally if it's only for 3 months, then I don't get locked into a crap rate.

So you see - it's up to you and your own priorities.

£250/day is only a crap rate if your cicumstances are different. Starting off at £250/day in the North West for example and you being close to home is pretty good. Being a long-term contractor at that rate and in London would indeed be crap. A lot of perm people including myself come from salaries of less than 30k, so 250/day is a decent enough improvement.

[NeverBeenNorthOfTheM25]

£250/day is only a crap rate if your cicumstances are different. Starting off at £250/day in the North West for example and you being close to home is pretty good. Being a long-term contractor at that rate and in London would indeed be crap. A lot of perm people including myself come from salaries of less than 30k, so 250/day is a decent enough improvement.

I think you'll find Cojack will point out his statement was talking about just him and his personal situation where he wouldnt take £250 a day unless on a short term basis, not necessarily saying that £250 a day is a bad amount across the board, because everythings relative. If youre a junior web developer breaking into contracting, a long term £250 a day contract is pretty good. If youre a java developer who has worked for a multitude of investment banks, then you would probably laugh in the face of £250 a day.

I would say this though.

I'd rather be locked into a £250 a day contract that lasts for a year, knowing you can plan out your year (re: holidays etc) than take a £300 a day contract for a month, not knowing if its going to keep rolling, not being able to book holidays because you might need to launch straight into your next contract if a suitable one becomes available in case another role doesnt come along for ages.

A guy on £250 a day will still earn more than a guy on £300 a day if that guy on £300 a day is spending nearly half the time warming the bench.

And especially if youre a 'dime a dozen' contractor, as much as many of us would like to believe we are the best of the best, then sometimes the longer term contract at the lower rate is the better option.