Reply to: Getting started as a contractor

[malvolio]

Plus Darren and SJD, of course. Although I would be remiss if I didn't point you at PCG's new One-Stop service...

Also, be aware it's not necessarily a suck-it-and-see scenario. Many permies will not take ex-contractors, especially in non-technical roles, and you might find the extra income a bit addicitive. Be very clear about why you are going contracting, it is not a game, it is a serious decision.

And yes, amateur, I make no apologies. You want to be a contractor, you learn to stand by yourself. Every thing you have asked is all over these boards and covered in detail in the first-timer guides. Learn to do your own research then come back in a few years (not months) and tell me how it works.

[jor-el]

Do you vibrate under the influence of a magnetic field? Well then you are an armature.

lol. good spot

[realityhack]

Do you vibrate under the influence of a magnetic field? Well then you are an armature.

[jor-el]

Jeez, may the good Lord save us from amateurs...

Doing all the right things using your own company and keeping under the 40% tax band you should get around 75% net income. That is the higher point, above that you'll be doing something really clever that isn't really clever.

Use any umbrella and you not only have to fund all the same outgoings and pay PAYE, ERNICs and EENICs but you also have to pay them a fee to give you your own money back. How much you pay them is up to you and the market.

Inside IR35 you pay full taxes on 95% of your gross (simplisticly). Inside IR35 with an umbrella you pay full taxes on 95% of your gross less their fees.

See where we're coming from yet?

If somewhere aroung £1000 a year to be a contractor is important to you, either you're not earning enough or you need a reality check. There is no free money any more.

Well...I am new at this so I'm not ashamed to be called an amateur. I reckon you won't be able to call me that in a few months but for now - you're right.

I see where you're coming from. I'm on a good wage now as a permie (48.5k) and even when I calculate the permie benefits and the new budget - my take home is still higher as a contractor.
I'm going to try this out for a year or so and then decide on the way forward (ltd, umbrella, permie).

Btw, anyone has any views on TreasureGuard? If I do decide to start my own ltd, I'm considering to go through them...

[malvolio]

When I first offered this contract I was told I will be taking home something between 75%-80% of my contract. Well...this is certainly not the case now that I'm actually talking to umbrellas companies.

I'm quite confused with the IR35 concept. Why am I considered in if I use an umbrella company? If I use my own ltd will be in or out?

I guess for me, because I'm not likely to have expenses, the tax will be the worst possible i.e. in IR35 and no expenses. Any way to avoid this?

As for choosing an umbrella company - Parasol gave me the best take-home rate but I guess they use different parameters in their calculation because as I understand it - I should be getting net paid the same with every company minus their fees. is it right?

Jeez, may the good Lord save us from amateurs...

Doing all the right things using your own company and keeping under the 40% tax band you should get around 75% net income. That is the higher point, above that you'll be doing something really clever that isn't really clever.

Use any umbrella and you not only have to fund all the same outgoings and pay PAYE, ERNICs and EENICs but you also have to pay them a fee to give you your own money back. How much you pay them is up to you and the market.

Inside IR35 you pay full taxes on 95% of your gross (simplisticly). Inside IR35 with an umbrella you pay full taxes on 95% of your gross less their fees.

See where we're coming from yet?

If somewhere aroung £1000 a year to be a contractor is important to you, either you're not earning enough or you need a reality check. There is no free money any more.

[Churchill]

Hello all,

I am a few weeks from my very first contract. Initially it's a 6 months one after which I'll see if I like this better than a permanent position.

I think I'll go with an umbrella company to start with as I don't want to open a ltd company just for a few months.

I have a few newbie questions so please bear with me

Firstly, the umbrella company - I'm aware of the services they provide but besides the level of service, do they make different calculations on the net, take-home salary? i.e. is it possible to have a few hundred pounds difference between several companies with the same contract?

Which one would you recommend? My finalists are: OrangeGenie, Contarcor Umbrella and Parasol. any preference?

Also, I'm not expected to claim any expenses as I will be living 15 minutes walk from my office so no traveling or b&b but what is this Subsistence expense? Can anyone claim that? what is the rate of this?

Finally, what % of my contract should I expect as a take home as monthly salary? (assume £400 daily rate).

Thanks for your answers and patience.

Jor El

Have you ordered your Porsche yet?

[SoupDragon]

jor-el - the only variable factor when choosing an umbrella is how much they charge. FPS charge 15 pounds a week, I doubt you'll find it cheaper anywhere else.

[jor-el]

Ir35

When I first offered this contract I was told I will be taking home something between 75%-80% of my contract. Well...this is certainly not the case now that I'm actually talking to umbrellas companies.

I'm quite confused with the IR35 concept. Why am I considered in if I use an umbrella company? If I use my own ltd will be in or out?

I guess for me, because I'm not likely to have expenses, the tax will be the worst possible i.e. in IR35 and no expenses. Any way to avoid this?

As for choosing an umbrella company - Parasol gave me the best take-home rate but I guess they use different parameters in their calculation because as I understand it - I should be getting net paid the same with every company minus their fees. is it right?

[malvolio]

No - they don't make wacky claims re: expenses / dispensations. You can only claim things like business travel and such.

Fair enough; must admit I stopped looking. However I suggest you check out "business travel" and such a bit more, since there have been arguments that the "normal place of work" definition is now the client site, not your home address nor the umbrella offices, hence business mileage may not be claimable...

You're still wasting money though, there are better margins through your own company even inside IR35. But to each his own.

[SoupDragon]

And on the top of the front of their website is the statement "Inside IR35? You can benefit by claiming allowable expenses"...

Nuff said. Was that coffee I could smell?

No - they don't make wacky claims re: expenses / dispensations. You can only claim things like business travel and such.

[malvolio]

I intend to use the FPS Umbrella...

http://www.charterhouseplc.com/index.html

Fees are only 15 quid a week

I used their composite company while that was still permitted and it was always run efficiently.

And on the top of the front of their website is the statement "Inside IR35? You can benefit by claiming allowable expenses"...

Nuff said. Was that coffee I could smell?

[SoupDragon]

I intend to use the FPS Umbrella...

http://www.charterhouseplc.com/index.html

Fees are only 15 quid a week

I used their composite company while that was still permitted and it was always run efficiently.

[zathras]

Hello all,

I am a few weeks from my very first contract. Initially it's a 6 months one after which I'll see if I like this better than a permanent position.

I think I'll go with an umbrella company to start with as I don't want to open a ltd company just for a few months.

I have a few newbie questions so please bear with me

Firstly, the umbrella company - I'm aware of the services they provide but besides the level of service, do they make different calculations on the net, take-home salary? i.e. is it possible to have a few hundred pounds difference between several companies with the same contract?

Which one would you recommend? My finalists are: OrangeGenie, Contarcor Umbrella and Parasol. any preference?

Also, I'm not expected to claim any expenses as I will be living 15 minutes walk from my office so no traveling or b&b but what is this Subsistence expense? Can anyone claim that? what is the rate of this?

Finally, what % of my contract should I expect as a take home as monthly salary? (assume £400 daily rate).

Thanks for your answers and patience.

Jor El

Parasol are the Brolly behind the PCG Quality Umbrella(http://www.pcg.org.uk/cms/index.php?...361&Itemid=483)

The subsistence is for those working away from home. As you are not, then this will not apply.

With any Brolly you will be PAYE. I have not got the figures handy but your costs will be the same as if you were employed less the Brolly Fee. If you went with the PCG-QU then this also includes PCG Membership in the Fee (Standard).

Being with a Brolly is not the most tax efficient, and actually gets you the least amount of take home pay. If you are concerned about setting up have you also considered the PCG OneStop service (http://www.pcg.org.uk/cms/index.php?...320&Itemid=622)

[Lucifer Box]

Read the stickies in the accounting forum and the first timer guides here and at www.pcg.org.uk. Essentially though the calculations will differ based on different assumptions about your circumstances, unsurprisingly. Beware umbrellas who inflate their take home figures with bogus expenses and beware also of the "dispensation" scam. A read through the accounting forum will familiarise you with these.

[jor-el]

thanks

Sigh,

1. Yes, depends on what they charge.

2. Search

3. I'd hazard a guess at not but dont know what your contract is like. @ £400 a day is the extra quid you save in tax really worth the hassle.

4. The same as PAYE minus any expenses (which I'll say you will have none of).

So mostly search.

Thanks for your reply.
Yes, I have searched this forum and even spoke to quite a few companies and the 3 I mentioned sounded the best to me but as I'm new, I thought you ppl would have current and relevant insight on these companies.

They all charge pretty much the same so I don't get how their calculations differ. Thanks for your help and sorry for the newbie Q's. I'm a fast learner, though ;P