Contracting Experiences

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I'll keep that in mind, cheers for the info Pete...

 

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Hi guys this is really interesting stuff.
I've always thought about contracting but what happens if you started a contract finished it and then realised that contracting wasn't for you? Would you get hit big time by the Tax Man?

 

That really depends on how you operate and how much tax you chose to pay or not pay.

You can work through an umbrella who effectively employ you and pay you through PAYE and never hear a peep out of Hector.

Or you can form a Ltd and pay yourself a higher salary than the minimum wage and not claim any travel/lunch as operating expenses.

Or you can pay yourself minimum wage and all the rest in dividends, claim all your trave, lunch, starbucks coffees, broadband, mobile phone, some of your rent/mortgage, bills etc which is a bit like waving a red flag to a bull.

That being said I've heard of people who've paid themselves more than the minimum salary and not taken it too far with the expenses only to get investigated while others have paid the very least amount of tax they are legally obliged to and not heard anything..

The thing with salary when you're a Ltd is that you have to pay employer's NI at 12.8% on top of any salary so anything above the minimum tax free amount get's taxed at income tax+NI+employer's NI so it's costly.

It would be far easier to just be a self employed sole trader but as 99.99% of IT contracts go through agencies the agents would be liable for employer's NI so it's them who insist we form Ltds.

We don't make the rules - but we do use them to our advantage...

The thing with a Ltd is aside from your PAYE and NI payments (which you can do monthly or quarterly if your salary is below £1500 a month) you don't pay corporation tax until 9 months after the end of your trading year so you have to save it up and not spend it..

It's a big headache setting up a Ltd but when it's up and running it's great!

 

Thanks......right then.....am i correct in saying that if i have an accounted he will sort all of this out?
sorry if i'm sounding like a numpty but i'm just starting to look into this

 

No worries, it’s all very complicated to start with and has taken me over 3 months to even begin to understand it and I’m still getting there..

Accountants vary depending on how much you want them to do and how much they’ll charge. My one is only doing the end of year accounts and helping me with my personal tax return – I do my PAYE and adding up of the receipts etc for expenses – always keep all receipts.

Some accountants will do your PAYE for you and even have a snazzy online facility to fill in your expenses etc. Some will help you with the whole shebang from registering the company, opening a business account and all the rest.

When you register your company you can get the cheap option of just registering or you can get an accounting package thrown in as well to go with it. It’s all down to how much you want to spend. My accountant works out at £50/month, some of the special bells and whistles guys cost up to about £120/month – it’s really up to you.

I was recommended my accountant by an IFA who made the recommendation on the fact that he’s a ‘proactive’ accountant which means if he notices ways of cutting tax liabilities he’ll tell me. Some accountants just do the books and that’s it. My one also has experience with an IR35 case which he won.

It’s not hard to do your own PAYE and HMRC have a pretty good CD ROM they’ll send you with all the calculators, forms and instructions on how to do it online.

I’ve worked out that I’m liable to pay about £130 a quarter for all income tax/NI and employer’s NI so I’m going to set up a standing order and put it on autopilot. I’ve made a spreadsheet with all the formulas to do all the company accounts, how much to pay to Hector, how much to pay myself in salary each month and how much I have left over (after expenses and corporation tax) in profit that is available to take as dividends.

Send me a PM if you want a copy – I’m quite proud of it

I’m not messing around with VAT or any ‘benefits in kind’ which get horrendously complicated when it comes to NI. I’ll cross that bridge when I come to it. Also when I’ve paid off all my credit cards and bad debts I’ll start investing through my company as well but that gets complicated so I’ll leave that until the debts have gone which is a good few months.

 

this is great stuff Pete and everyone else, you've helped me loads. i'm off on holiday next week, and when i get back i'm going to start the ball rolling i think.
So how do you guys find work?
a) agency
b) job sites (if so, please share. i've had a look at jobserve and cwjobs, but you can never have to many)
c) advertising (your website, magazines, brouchers, etc)

cheers dudes

 

a) agency
I'm working through Reed at the mo and I'm hoping to build up a good relationship with them so that they will push me for other jobs. The place I'm working for at the mo are really happy with me so far. Hopefully getting a good relationship with agencies will help a lot as they will trust me to do a good job in the future.

b) job sites (if so, please share. i've had a look at jobserve and cwjobs, but you can never have to many)
when I was made redundant from my previous job I put my CV on cwjobs and Jobsite as well as registering on Reed and Nigel Wright's websites as they are big players in IT (in my area at least). I got plenty of phone calls but you have to cut through all the idiots who ring you from dodgy dave's IT agencies as there are plenty out there that offer you itnerviews and don't ring back or offer jobs that aren't remotly what you do etc

c) advertising (your website, magazines, brouchers, etc)
I have thought about a website and business cards but at this time I don't think they would be any benefit to me at present but is something I might do in the future if contracting takes off for me.


Just a word of warning though, whilst I'm chuffed to bits with my job and the wages I know the disadvantages of contracting such as not getting paid for holidays, sick, public holidays etc. Also you can be finished sometimes with no notice and if you have bills and a morgage then I would think long and hard if you have a full time job and want to move into contracting as it could be a big gamble.

 

Some great info on this thread so far.

To those that are currently contracting can I ask what your skill sets are?

Most of my experience is in Networking/Infrastructure, with a bit of IT/Project management.

I'm considering going for Prince2 certification and MCTS for Exchange 2007 (as that's my next project) to beef up my CV a bit.

I like the idea of contracting, but need to do a bit more research on the rates for my skills.

 

Excellent thread!!!

 

This is quite an interesting thing with contracting, I’ve changed directions twice since starting to suit the roles I’ve got. This is only my second contract but for my last one I started getting interested in ITIL and Prince 2 – I was doing 2nd line desktop on looking to get more into project management as opposed to a 3rd line route.

Now I’m doing infrastructure support on all Cisco kit – multilayer switches/load balancers(CSS)/ASA firewalls - with SAN’s, clusters, Linux, financial feeds coming and from places like Reuters and Bloomberg, trading applications and no desktop support so I’m focusing on CCNP now. This role is a rolling contract with the potential to go perm and I have no desire to move until I know all these systems like the back of my hand which will be quite a while.

I started my ITIL foundation which I intend to finish and then go straight on to the switching part of CCNP (BCMSN) as it is most relevant to my function here. Along the way I intend to get Prince 2 so I can become a CCNP/ITIL/Prince 2 network consultant. That is my preferred niche although it’s good to be ‘fluent’ with other things like active directory, DNS as well.

It’s hard to know whether to try and be a jack of all trades of a master of 1, especially in contracting where the more you have on your CV the more eligible you are. I’m going to concentrate on high level networking with a focus on service delivery and project management.

Before I came to this contract I was a high level 2nd line desktop tech with a CCNA – I still am but I’m now doing 3rd line Cisco.

I think for contracting it’s very important to be very adaptable, productive and have a focus on professionalism. You *should* be able to start at a new place and pick everything up and start being productive almost on day 1 with no need for ‘getting up to speed’

Being productive can mean being resourceful if you don’t know the answer ;)

 

HI all,

I’ve attached a template spreadsheet that I’ve made to do my monthly accounts. I *think* it’s all tickeddyboo with the formulae – I haven’t worked out how to get formulae to work across sheets – maybe some of you MOS/MICE could help with that

It’s 3 sheets:

Sheet 1: high level overview of:

gross income
expenses
corp tax
net profit

Director’s monthly payments

Sheet 2

All expenses detailed including salary

The monthly expenses payment

Sheet 3

Salary, income tax and NI details all broken down into yearly, quarterly and monthly. This includes employer’s NI.

I am still not 100% sure of the NI stuff as it’s hideously complicated.

I should state that this is not a guideline on how to run a Ltd company – if you’re going down this route you will need an accountant! This is just what I’ve developed for myself to not have to pay a higher accounting package and to make my life a lot easier, essentially so I know how much to take out in dividends and how much to keep in the company each month.

Please let me know of any ~bugs or inaccuracies

 

Thanks for the spreadsheet Pete, and for the insight into operating as a LTD company.

Interesting that you mention financial streams, the company I work for now is involved in that side of things.

For now I think I'll knuckle down and learn Exchange 2007 inside out. Hopefully getting the cert along with the hands on experience of rolling out will get me a few contracts as more companies migrate to it.

 

wow pete, you've put some serious work into that. its great that your sharing it Cheers

have a good weekend people

 

Thanks for the spreadsheet pete, will come in handy in the future

 

I paid my quarterly income tax, employee and employer NI today.

That's that for another 3 months - it was £150 (ish).

It's suprisingly easy when you get an online business account and can set it to just go on autopilot.

Corp tax will hopefully not be too much of a bugger at 9 months after the end of my companie's trading year - I intend to have all the money I owe in there + interest accrued

 

I'm been contracting solid for almost 10 years now and I love it. I've worked all over the country and for a lot of big names, all of which helps to make your CV that much more impressive.

My rates have varied from £17-£25 an hour during this time and I have found myself out of work on occassion but planning for these situations is easy enough. At the end of the day it comes down to an individuals comfort threshold with new situations and people. Not to mention their need for a solid paycheck each month.

One of the most important things to remember is networking, keep in touch with places you've worked before, other contractors you've worked with etc... One trick I always use is to go through the global address list in each company and make a note of the contact details for each head of department I could potentially work in.