Please help a newbie!

[confuzzled]

Hey all, just looking for a little advice, not sure where to start really.

A little background- I recently left the military, with an eye on getting into IT. Most of my military career has been working within signals - digital radios, IT support, a bit of networking. I did a couple of CISCO/COMPTIA courses just before I got out to aid in the transition from the military.

Anyway, I was offered a job due to a recommendation from a friend & walked into it, the money isn't brilliant but that didn't bother me so much as I just wanted to get my foot in the door, so I accepted happily accepted the offer. The interviewer mentioned that I'd need to set myself up a ltd company but that it was 'just a formality'.

Well, I've now looked into it and although setting up the ltd company is indeed a formality, the amount of work/cost that goes into running it later seems a little over the top for this particular offer. The contract will be a few months @ ~ £100/day, including travel expenses + any hotels will be paid for if I'm required to stay overnight.

Ok, now that's out of the way, my questions:

1. Assuming I started work today, would my end of year returns be due next month (April, end of tax year) or next March (One year after the company is formed)? I've seen this answered both ways online which realy doesn't help newbies.

2. I'm expecting a new contract to be available immediately following it at a slightly better rate (~£20/day). So are these worth me doing 'to get my foot in the door' or is it just going to be a waste of my time?

IF I do keep contracting following this, I'll be looking to earn more money than this obviously, the main reason I'm looking at it at all is for the experience & references. I know that £120/day isn't worth staying contracting in the future, it just came up in conversation and I was a shoe-in due to being recommended.

PS. Not sure if it's within IR35 yet as I haven't received the contract.

Thanks for any advice you can offer guys, finding this site has been beyond helpful already!

[northernladuk]

I think the consensus is that anything around and below £30k it isn't worth opening a LTD and you might as well got for a brolly. I also think it is worth going brolly for some people starting off just so they can start to get a grip of the situation rather than cocking up from the start (which people often do reading these forums long enough). Doing 6 month brolly allows you to start work without worrying about the business end but in the meantime get a good understanding so you are better prepared to start a LTD. Not everyone agrees with that approach though.

Also with a brolly you don't have to worry about about IR35.

I don't think there is anything wrong with a lower rate to get a foot in the door as long as the role is right. There is a saying that you are only as good as your last contract. If you take any old work then yes, you are going to struggle on your next gig. If the work you are doing gives you experience for the roles with higher rates then it's not a bad investment of your time. You need to do the maths, how long can you last on the bench before finding a £400 quid role compared to taking a £200 one straight away. Experienced contractors probably wouldn't go the £200 one as they know a good one will come soon.

As I say, if the role you are doing gives you demonstrable experience towards a good role then I don't think it's such a bad thing for a newbie to take a lower rate. You are a risk to agents and clients having no gigs under your belt.

Just understand your situation though. You are not taking 'jobs' anymore. You are taking assignments, gigs, whatever you want to call them. It's a minor point on the wording but you have to make sure you have the right mindset. The people you work for are your clients, not employers. The guy you deal with on site is the client manager, not line manager and so on. I think it's important to get this right. If you can't think like a business I can't see how you can act like one.

[confuzzled]

Thanks, I'll get in touch with them and see if they're happy with an umbrella company.

Finances aren't a problem at all, it's the experience I want and it does seem to be good for that.

I'll get in the mindset, but this has literally come up in the last 24 hours so may need a little time! I hadn't even considered contracting before that as I thought it was all high paid work where I'd need the experience of beforehand.

Thanks for the advice, much appreciated.

[DirtyDog]

The contract will be a few months @ ~ £100/day, including travel expenses + any hotels will be paid for if I'm required to stay overnight.

At that rate, contact LisaContractorUmbrella - she'll see you right.

Ltd just isn't worth it at that level - bear in mind that if this is your only contract (regardless of how you operate), you won't be able to claim as much as expenses since you'll only have one (permanent) place of work.

[GazCol]

I wouldn't right off going down the Ltd route, provided contract and working practices are outside IR35 as even on circa £100/day the take home pay would be, roughly I add, £1,800 vs £1,400 pcm.

[TheFaQQer]

I wouldn't right off going down the Ltd route, provided contract and working practices are outside IR35 as even on circa £100/day the take home pay would be, roughly I add, £1,800 vs £1,400 pcm.

ContractorCalculator gives a take home of £1394 a month on £100 a day (link) That equates to £348.50 a week

ContractorUmbrella gives a take home through them on £100 a day with no expenses of £346.61 a week

You're not going to get an accountant to do the paperwork etc. for £2 a week, so I'd be going umbrella at that rate (or permie on £21k a year)

[GazCol]

ContractorCalculator gives a take home of £1394 a month on £100 a day. That equates to £348.50 a week

ContractorUmbrella gives a take home through them on £100 a day with no expenses of £346.61 a week

You're not going to get an accountant to do the paperwork etc. for £2 a week, so I'd be going umbrella at that rate (or permie on £21k a year)

The contractor calculator works on the basis of calculating 44 weeks of the year - if this chap only has the intention of contracting for the duration of this (and potentially the next contract) the income has to be pro-rata'd to 52 weeks, that is where I got my figure of £1,800 from.

[Craig at Nixon Williams]

ContractorCalculator gives a take home of £1394 a month on £100 a day. That equates to £348.50 a week

ContractorUmbrella gives a take home through them on £100 a day with no expenses of £346.61 a week

You're not going to get an accountant to do the paperwork etc. for £2 a week, so I'd be going umbrella at that rate (or permie on £21k a year)

I would have thought that any accountancy or umbrella fees would be built into the figure, so that would £2 in your back pocket!

[TheFaQQer]

I would have thought that any accountancy or umbrella fees would be built into the figure, so that would £2 in your back pocket!

No, the figures are for 44 weeks a year, £0 in expenses, so you'd have to put the accounting in there as well.

If you change the calculator to 52 weeks a year, £1200 in expenses, £7500 in salary then it gives you a monthly take home of £1778.

It doesn't factor in any additional startup and shutdown costs of only running a Ltd for a few months, though. I also haven't included any insurance costs that you'd need as a Ltd that you don't as an umbrella. Or the opportunity cost of the hassle of running the business for yourself, and debating whether the contract is going to be inside or outside IR35...

[Craig at Nixon Williams]

No, the figures are for 44 weeks a year, £0 in expenses, so you'd have to put the accounting in there as well.

If you change the calculator to 52 weeks a year, £1200 in expenses, £7500 in salary then it gives you a monthly take home of £1778.

It doesn't factor in any additional startup and shutdown costs of only running a Ltd for a few months, though. I also haven't included any insurance costs that you'd need as a Ltd that you don't as an umbrella. Or the opportunity cost of the hassle of running the business for yourself, and debating whether the contract is going to be inside or outside IR35...

I have just done the calculation by hand, using the following assumptions:

• 44 weeks billing, 5 days a week
• No flat rate saving
• No expenses
• Next years tax rates & allowances

The take home would be £19,355 from a company and £16,757 from an umbrella (this excludes any fees, but accountancy fees and umbrella fees are quite similar). As you rightly say, it doesn't cover any fees associated with later closing a company, any start-up fees like insurances or indeed the opportunity cost of spare time used doing admin...