How to weigh up Inside vs Outside opportunities

[MrC]

A (theoretical) less autonomy inside - you're told where, how and when possibly to do your job. How you do it. Have to ask for holiday, that sort of thing.

Of course that's theory, and there are of course """outside""" jobs that have a lot of control and supervision , mutuality of obligation, no substitution etc. and """"inside"""" jobs that are outside in everything but name but just pay a lot to cover tax. But that's how it's meant to work.

Indeed in theory you'd choose inside vs outside based on desire for autonomy/aversion to micromanagment or a preference to just turn up, follow orders and get paid without having to worry as much about the bigger picture.
But as you say where theory meets reality here it's often as clear as mud.

[PerfectStorm]

A (theoretical) less autonomy inside - you're told where, how and when possibly to do your job. How you do it. Have to ask for holiday, that sort of thing.

Of course that's theory, and there are of course """outside""" jobs that have a lot of control and supervision , mutuality of obligation, no substitution etc. and """"inside"""" jobs that are outside in everything but name but just pay a lot to cover tax. But that's how it's meant to work.

[MrC]

There are more pros and cons about the actual work than there is about the money IMO. Firstly I'd be looking at the content of the contracts and what it brings to you. Extra knowledge, location, type of work, length etc which would give me an idea how much I'd do the gig for and THEN you can look at the money. Even with a dip in income an interesting, new tech, exciting gig can still be the one to pic.

If your sole comparison is take home then fill your boots but IMO there is much more to it than that.

Yes, fair point. Congrats on maing the first response to my post which exceeds caveman intellect btw!

[northernladuk]

There are more pros and cons about the actual work than there is about the money IMO. Firstly I'd be looking at the content of the contracts and what it brings to you. Extra knowledge, location, type of work, length etc which would give me an idea how much I'd do the gig for and THEN you can look at the money. Even with a dip in income an interesting, new tech, exciting gig can still be the one to pic.

If your sole comparison is take home then fill your boots but IMO there is much more to it than that.

[MrC]

Sorry, is this thread supposed to be one to help ME, not help you?

No, it's widely known that you are way beyond help

[eek]

Avoid taking Outside contracts, you WILL be declared inside at some point and face a hefty bill.

You've changed you tune - to the extent I have to ask are you trolling every thread.

[ensignia]

Avoid taking Outside contracts, you WILL be declared inside at some point and face a hefty bill.

[WTFH]

Yes indeed the specifics do matter. The figures quoted are made up but they are just placeholders to help get your thinking in order so that when you find yourself on the market looking for roles and there are actual inside & outside opportunities you already have a method to evaluate the relative worth of them.

You could arrive at a rule of thumb which says that an inside contract needs to pay a x% premium to compare to an otherwise equivilient outside gig.
What x would be for each of us may differ depending on age/pension, risk aversity, company structure, how much you need to live on as you say. Doesn't make it incalcuable though.
Indeed there are rules of thumb (ranges) that have been much bandied around over the years of how much income retention one could achieve through a limited co e.g. 70-80%

Sorry, is this thread supposed to be one to help ME, not help you?

Ah, I wish I had known that.

Thanks.

My motivation isn't the same as yours, I can tell by reading your posts. Also, a decision made 5 years ago should be different to one today, and to one made next year. If you have a rule of thumb that is based purely on hourly rate, current inflation and how rules are applied today and you stick to that when you are looking for a role in 6 months time, then your rule is out of date.

What exactly do you do for a living? Are you a failed agent, a failed financial adviser or an accountant who wants to be a lion tamer?

[MrC]

Oh, and if anyone looks at your posting history of threads you have started, it sounds like you're just making everything up.

[MrC]

2. It is pointless when the exercise starts with "I've made up these numbers, but will rely on them for all calculations". The specifics really matter.

Yes indeed the specifics do matter. The figures quoted are made up but they are just placeholders to help get your thinking in order so that when you find yourself on the market looking for roles and there are actual inside & outside opportunities you already have a method to evaluate the relative worth of them.

You could arrive at a rule of thumb which says that an inside contract needs to pay a x% premium to compare to an otherwise equivilient outside gig.
What x would be for each of us may differ depending on age/pension, risk aversity, company structure, how much you need to live on as you say. Doesn't make it incalcuable though.
Indeed there are rules of thumb (ranges) that have been much bandied around over the years of how much income retention one could achieve through a limited co e.g. 70-80%

[WTFH]

Oh, and if anyone looks at your posting history of threads you have started, it sounds like you're just making everything up.

[WTFH]

Being hard to do doesnt mean it's pointless. The correct decision could well leave you ~20-30% better off after a few years contracting.

1. It is pointless because if you expect a contract to last for a few years, it's not going to be outside. If you mean that you intend to have a few contracts over a few years, then you need to allow for down time as well.
2. It is pointless when the exercise starts with "I've made up these numbers, but will rely on them for all calculations". The specifics really matter.
3. It is pointless because the specifics really matter. e.g. If you put all the family as shareholders in the company (or employees) and none of them do a tap of work elsewhere, then you could pretend that you're making great savings, except you've given your money to them
4. It is pointless because the specifics really matter. e.g. a contract working from home will have very few expenses
5. It is pointless because no two people have the same starting position, viewpoint or priorities, so no one can tell you how you think, what you value, what is important to you.
6. It is pointless because the "correct decision" has to include how much you spend, not just how much you earn. Putting 40% of your income into a pension fund is great, if you can live off the remainder. Investing company funds is great, if you're happy with the risk and tax implications. Borrowing while interest rates are low sounds great, but if they climb, can you afford repayments? There isn't one single correct decision that applies to everyone. The specifics really matter.

[MrC]

It's pointless trying to compare inside to outside incomes, they are way too many variables. The other areas - expenses, ease of use, business risk - are obviously more immediate.

Being hard to do doesnt mean it's pointless. The correct decision could well leave you ~20-30% better off after a few years contracting. If you don't care what you earn then i have some nice work for you....

However there are also risks around outside contracts as a result of uncertainty over Section 10 changes and the somewhat cavalier attitude of recruiters to the details of the engagement. Have a read through this thread...

Yes that is why I said

...SDS that turns out to be wrong.

but didn't want to get overly bogged down here as being thoroughly covered elsewhere.

[malvolio]

It's pointless trying to compare inside to outside incomes, they are way too many variables. The other areas - expenses, ease of use, business risk - are obviously more immediate.

However there are also risks around outside contracts as a result of uncertainty over Section 10 changes and the somewhat cavalier attitude of recruiters to the details of the engagement. Have a read through this thread...

[MrC]

OK so I'm trying to clarify my understanding of inside vs ouside contracts in the current market condtions and their relative pros and cons. This would help evaluate 2 comparable opportunities (similar roles , tech, sector) of an inside contract at £550/day vs and outside one at £400. These figures are purely made up - just trying to illustrate that the outside contracts seem to be priced lower due to the expected tax saving.

Inside
+No tax risk
+Brolly is easier to run
-Lots of tax/NI to pay
-little or no expenses
-Rate may or may not include ER NI


Outside
+Less tax/NI via divs
+greater flexibility with what you do with co earnings eg pay contributing spouse, retain earnings and defer (mitigate HR) tax, invest co funds
-tax risk of being found inside (risk and likelihood varies depending on whether exempt through small/offshore feepayer or larger co with SDS that turns out to be wrong.
-extra running costs of ltd eg accountant fees
-extra hassle of running ltd
-extra hassle of verifying outside status intially and ongoing basis and documenting everything



I know there are calculators out there designed to compare rates but most are too simplistic.
However neither account for half of the above financial differences. Indeed these things become very nuanced / convuluted and hard to model.

Have I missed any key points from the above lists?

Interested to know what approach others are taking to evaluate the options. I know from other recent threads that some won't take outside atm as deem it too risky. I suppose part of my question is how much extra retained renumeration % do you need from an outside gig to offset the extra hassles and risks?