contracting vs permanent job

stranger12

hi All,

I have a questions that has been bugging me today.

You have two type of employement which are permanent and contract.
with permanent the employer deducts the tax and ni which is what i have done all my life.

with contracting I guess you have two sub types as follow:

contracting where you sign short or long term contract at x rate per day for 2 weeks .

or you sign a contract for longer term of 1 year .


in either case of contracting, do they pay you the full income and you have to do a tax return ?

can you claim travel costs etc against your business expenses ?



so for instance if I earn 20k a year and don't get any allowance for my travel if on permanent job, I could get a monthly tax exemption of £100 lets say as expense to get to work on tax return if contracting , right ?


for the type of jobs I am doing contracting is between 300-500 per day depending on experience.

I guess this is what you get paid if you work short term such as few days or weeks but do you think this is the same case with people that get a contract for 6 month or 1 year lets say ?

I guess if you get a longer contract they pay you less as you are guaranteed work for certain length.

many thanks

TELLIT01

'Contracting' is generally the term used for somebody who has responsibility for sorting out their own tax, NI etc i.e. self employed. Travel expenses etc can be set against earnings.
'Fixed Term Contract' is generally where somebody is an employee but with a fixed end date. Travel and other expenses would have to come out of salary and can't be set against earnings.
As a 'contractor' there wouldn't necessarily be a direct relationship between the term of the contract and the daily rate.

MataNui

Its probably best to not confuse fixed term contracts (1 yr) with typical day rate contracting. As far as travel expenses go it can be a bit of a minefield. Generally you can claim from your 'normal' place of business to the contract site. Most contractors trading via ltd companies will use their home address (usually OK if all business stationary etc has that address and you sometimes work from home etc).

Yes you can get those rates for 6 month contracts etc. A lot will be 3 months but i have never been anywhere that i wasnt offered an extension.
Most agencies that source contractors will require you either use an umbrella or trade via your own limited company (better option).

motorguy

stranger12 wrote: »

hi All,

I have a questions that has been bugging me today.

You have two type of employement which are permanent and contract.
with permanent the employer deducts the tax and ni which is what i have done all my life.

with contracting I guess you have two sub types as follow:

contracting where you sign short or long term contract at x rate per day for 2 weeks .

or you sign a contract for longer term of 1 year .


in either case of contracting, do they pay you the full income and you have to do a tax return ?

can you claim travel costs etc against your business expenses ?



so for instance if I earn 20k a year and don't get any allowance for my travel if on permanent job, I could get a monthly tax exemption of £100 lets say as expense to get to work on tax return if contracting , right ?


for the type of jobs I am doing contracting is between 300-500 per day depending on experience.

I guess this is what you get paid if you work short term such as few days or weeks but do you think this is the same case with people that get a contract for 6 month or 1 year lets say ?

I guess if you get a longer contract they pay you less as you are guaranteed work for certain length.

many thanks

Theres really three types :-

Permanent staff - paid a wage tax deducted by employer

Temp staff - paid a wage tax usually deducted by employer or agency, but definitely one of the two

Contractor - you're paid a day rate, and you sort out your own tax, usually through a limited company or umbrella company.

I'm a contractor in IT service management and have been for a year or so now. I've 20+ years experience behind me and am currently contracting for one of the big international IT service management companies.

Currently as a contractor you can claim back travel expenses. That looks set to change next april though as the tax laws are under review.

Typically contracts are 3 months, and depending on the job role can extend onwards. Its not uncommon for people to take a 3 month contract and still be there 18+ months later.

One thing i would say is, if you're currently being paid £20K per year snd believe you can get £350 to £500 a day, then either (a) you're seriously underpaid by a factor of 2, or 3 compared to your skills or (b) your expectatons of how your skillset will map to an employers view of your skillset are out of alignment.

motorguy

MataNui wrote: »

Its probably best to not confuse fixed term contracts (1 yr) with typical day rate contracting. As far as travel expenses go it can be a bit of a minefield. Generally you can claim from your 'normal' place of business to the contract site. Most contractors trading via ltd companies will use their home address (usually OK if all business stationary etc has that address and you sometimes work from home etc).

Yes you can get those rates for 6 month contracts etc. A lot will be 3 months but i have never been anywhere that i wasnt offered an extension.
Most agencies that source contractors will require you either use an umbrella or trade via your own limited company (better option).

^^^^^^

What he said.

stranger12

now my salary is round 55k but that was an example.


many thanks .

motorguy

stranger12 wrote: »

now my salary is round 55k but that was an example.


many thanks .

Ah right was wondering.

Have a look around on https://www.contractoruk.com