| going from employer to contractor [message #383133] |
Mo, 24 April 2006 14:50 |
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I work in IT, and my company offers no pension, or other useful
benifits.
my current notice period is 1 month (for both them and me)
I'm thinking of asking at my next review to be taken on as a contractor
instead of a wage rise, as then could look after my own tax in an
umbrella company.
There are also a couple of other benifits to my company, so they may go
for it.
Is this a wise move ?
how does this affct a mortgage application, given that my monthly
earning remain the same
Thanks to all
Simon
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| Re: going from employer to contractor [message #383136 ] |
Mo, 24 April 2006 14:55 |
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<simonsmith.uk [at] gmail.com> wrote in message
news:1145883046.251116.305460 [at] u72g2000cwu.googlegroups.com...
>I work in IT, and my company offers no pension, or other useful
> benifits.
> my current notice period is 1 month (for both them and me)
>
> I'm thinking of asking at my next review to be taken on as a contractor
> instead of a wage rise, as then could look after my own tax in an
> umbrella company.
>
Just make sure you find out all about IR35 first, as it sounds like this
will probably apply to you.
Adam
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| Re: going from employer to contractor [message #383143 ] |
Mo, 24 April 2006 15:30 |
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Cheers Adam for the quick response ...
I susppect it will , anyone know a good online ref for ir35 for the
(tax) layman? Can anyone explain it in terms a nerd couldunderstand ??
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| Re: going from employer to contractor [message #383144 ] |
Mo, 24 April 2006 15:30 |
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Cheers Adam for the quick response ...
I susppect it will , anyone know a good online ref for ir35 for the
(tax) layman? Can anyone explain it in terms a nerd could understand
??
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| Re: going from employer to contractor [message #383153 ] |
Mo, 24 April 2006 16:20 |
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<simonsmith.uk [at] gmail.com> wrote in message
news:1145885432.086279.304480 [at] j33g2000cwa.googlegroups.com...
> Cheers Adam for the quick response ...
>
> I susppect it will , anyone know a good online ref for ir35 for the
> (tax) layman? Can anyone explain it in terms a nerd couldunderstand ??
>
Briefly.... because your relationship with your client will be virtually the
same as any other employee (except you'll no longer have a range of
employment protection etc rights), you'll be taxed like an employee -
notwithstanding you have set up a Ltd Company.
The chief impact is that you will have to pay employER's NI yourself (as
well as employEE's) - so you need a roughly 11% uplift on your current pay
(exact figure depends on your earnings level and it changes slightly each
year). Your employer may agree this increase - because they will no longer
be paying this themselves.
You also need to allow for costs of setting up the Ltd Coy, annual fees for
accountancy / company secretarial (inc. Company House compliance), bank
charges (after possible initial "free banking" period). If your t/o is
above the VAT threshold, you also need to register for VAT, charge your
client VAT, and submit VAT returns each quarter.
Your total tax bill (income tax & Corp Tax) will probably be slightly less
than you now pay - but overall you're unlikely to be better off.
A new mortgage should still be available, but probably only on a
"self-assessed" basis - so you may not get such a good interest rate.
Others here should know more about this aspect.
Above all, tread carefully with "umbrella companies".
You'll find more info on HMRC website - also contractors groups etc.
--
Martin
[Remove barrier to reply]
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| Re: going from employer to contractor [message #383166 ] |
Mo, 24 April 2006 18:13 |
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>>Can anyone explain it in terms a nerd could understand
Being a self confessed "nerd" you will understand IR35 better than most
others. Your best bet is to read info on HMRC. You will also find lots of
usefull info on various accountants websites. Do a google search on the
subject.
Adrian
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| Re: going from employer to contractor [message #383169 ] |
Mo, 24 April 2006 18:38 |
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Martin wrote:
> <simonsmith.uk [at] gmail.com> wrote in message
> news:1145885432.086279.304480 [at] j33g2000cwa.googlegroups.com...
> > Cheers Adam for the quick response ...
> >
> > I susppect it will , anyone know a good online ref for ir35 for the
> > (tax) layman? Can anyone explain it in terms a nerd couldunderstand ??
> >
>
> Briefly.... because your relationship with your client will be virtually the
> same as any other employee (except you'll no longer have a range of
> employment protection etc rights), you'll be taxed like an employee -
> notwithstanding you have set up a Ltd Company.
>
> The chief impact is that you will have to pay employER's NI yourself (as
> well as employEE's) - so you need a roughly 11% uplift on your current pay
> (exact figure depends on your earnings level and it changes slightly each
> year). Your employer may agree this increase - because they will no longer
> be paying this themselves.
>
> You also need to allow for costs of setting up the Ltd Coy, annual fees for
> accountancy / company secretarial (inc. Company House compliance), bank
> charges (after possible initial "free banking" period). If your t/o is
> above the VAT threshold, you also need to register for VAT, charge your
> client VAT, and submit VAT returns each quarter.
>
> Your total tax bill (income tax & Corp Tax) will probably be slightly less
> than you now pay - but overall you're unlikely to be better off.
>
> A new mortgage should still be available, but probably only on a
> "self-assessed" basis - so you may not get such a good interest rate.
> Others here should know more about this aspect.
>
> Above all, tread carefully with "umbrella companies".
>
> You'll find more info on HMRC website - also contractors groups etc.
>
> --
> Martin
>
> [Remove barrier to reply]
are there big problems with umbrella companies
(http://www.parasolit.co.uk/)
also what if the terms of employment chaged (I'm currently on 1 months
notice , a 3 month contract would change this ) .....
thanks to all for the advice btw
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| Re: going from employer to contractor [message #383172 ] |
Mo, 24 April 2006 15:16 |
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<simonsmith.uk [at] gmail.com> wrote in message
news:1145883046.251116.305460 [at] u72g2000cwu.googlegroups.com...
>I work in IT, and my company offers no pension, or other useful
> benifits.
> my current notice period is 1 month (for both them and me)
>
> I'm thinking of asking at my next review to be taken on as a contractor
> instead of a wage rise, as then could look after my own tax in an
> umbrella company.
>
> There are also a couple of other benifits to my company, so they may go
> for it.
>
> Is this a wise move ?
IMHO no, As a contractor you need to see more in your
hand than simply cashing out a salary.
Being a contractor will lose you access to some benefits
if the job should end for reasons outside of your control.
Just saying that your take home will be the same is not
enough, it needs to be more, by quite a considerable
margin, for the move to be worthwhile.
> how does this affct a mortgage application, given that my monthly
> earning remain the same
Historically they will want to see previous accounts
which you wont have, but I think in the current era of
self cert mortgages I doubt that it will make a difference.
tim
>
> Thanks to all
> Simon
>
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| Re: going from employer to contractor [message #383184 ] |
Mo, 24 April 2006 19:45 |
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"Martin" <ngng [at] ngngng.BARRIER.fsnet.co.uk> wrote in message
news:Z853g.39$pL4.23 [at] newsfe7-win.ntli.net...
>
>
> A new mortgage should still be available, but probably only on a
> "self-assessed" basis - so you may not get such a good interest rate.
> Others here should know more about this aspect.
>
FWIW, I have my own limited company (albeit a 'real' one, and not something
that gets caught by IR35), and I have just applied for a mortgage. The
lender wanted to see my last 3 years of accounts, and calculated my salary
as my average earnings over 3 years. I got exactly the same interest rate as
anyone else would have done. That said, I have a long relationship and a
good credit rating with the lender.
I don't know whether all that's standard practice, though.
Adam
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| Re: going from employer to contractor [message #383192 ] |
Mo, 24 April 2006 20:59 |
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<simonsmith.uk [at] gmail.com> wrote in message
news:1145883046.251116.305460 [at] u72g2000cwu.googlegroups.com...
>I work in IT, and my company offers no pension, or other useful
> benifits.
> my current notice period is 1 month (for both them and me)
>
> I'm thinking of asking at my next review to be taken on as a contractor
> instead of a wage rise, as then could look after my own tax in an
> umbrella company.
>
> There are also a couple of other benifits to my company, so they may go
> for it.
>
> Is this a wise move ?
>
> how does this affct a mortgage application, given that my monthly
> earning remain the same
You would loose sick pay and your holidays if you did this. I would
certainly not consider contracting for the same wage, the company would save
a fortune.
You would miss out on rights to redundancy pay among other things.
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| Re: going from employer to contractor [message #383417 ] |
Mi, 26 April 2006 10:38 |
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Martin wrote:
>
> A new mortgage should still be available, but probably only on a
> "self-assessed" basis - so you may not get such a good interest rate.
Not so once you have 3 years accounts, I have access to any mortgage
rate that an employee does. There are brokers who specifically deal
with contractors, check the ads on the shout99 site and other
contractors sites, I have used Craig at Graduate and Professional (
www.gradprof.co.uk ) for many years.
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| Re: going from employer to contractor [message #383419 ] |
Mi, 26 April 2006 10:46 |
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simonsmith.uk [at] gmail.com wrote:
> Cheers Adam for the quick response ...
>
> I susppect it will , anyone know a good online ref for ir35 for the
> (tax) layman? Can anyone explain it in terms a nerd could understand
> ??
Yes, go here: http://www.sjdaccountancy.com/documents/ir35/index.html
You may need to register, but this is a trustworthy company.
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