Be a limited company for contracting?

TheTracker

The rule of thumb I use is to divide a permie salary by 100 for the market day rate for someone to do their job. 35k? 350/day. 700/day? 70k. For an employer, the burden of an employee tends to be about double the salary cost.

missile

I don't know where one can find an accountant to prepare annual accounts for £100?
There are several offering monthly rate, cheapest I have found is £20 / month for a small limited company.

TheTracker

missile wrote: »

I don't know where one can find an accountant to prepare annual accounts for £100?
There are several offering monthly rate, cheapest I have found is £20 / month for a small limited company.

It's not difficult to do yourself. Frankly if I wasn't able to pay 1k+ I'd be doing it myself, not looking for a £100 jobbie.

You can use a service like FreeAgent which makes it a doddle, or use a pc-based app like Solaraccounts. In fact, if you understand accounting you can do it all in a simple spreadsheet app.

One of the reasons to use a professional accountant at the outset is the learning you'll gain. What is and isn't allowable as expense, what's the best way to structure for tax efficiency, when various HMRC rules effect you, and so on.

stueyhants

There are also lots of other benefits of being a ltd company. You can claim for allowable expenses out of pre-tax income, potential to claim for transport costs. Also register for VAT using the flat rate scheme as this can give free money (this depends on your industry and how much you spend on expenses). There are risks associated with IR35 which you need to understand.

Apodemus

TheTracker wrote: »

It's not difficult to do yourself.

One of the reasons to use a professional accountant at the outset is the learning you'll gain. What is and isn't allowable as expense, what's the best way to structure for tax efficiency, when various HMRC rules effect you, and so on.

I would agree with the advice to DIY the accounting, the cost really has to be kept in proportion to the turnover (like all business costs!). If you are paying an accountant for your self-assessment on a £25k salary, then you really need to invest some time and effort to learn how to do it yourself. It really is very simple and now that Company's House and HMRC share a common return process for simple companies, it is all very easy.

A compromise, though, might be to pay an accountant in year one, then copy everything they have done in subsequent years - but you really cannot afford to pay them for monthly book-keeping, only for a single annual return.

DanStan

Definitely worth it for the savings alone. You'll need to pay an accountant though.

cjking

If IR35 were applicable, employer NI alone would swallow up about 2.4K of the extra 4K.

cjking

Profit on the flat-rate VAT scheme could be enough to pay most of accountant cost, if you have a cheap accountant.

tim_n

masamoah wrote: »

Hi

I am in the process of working saving for a mortgage. I am looking for a better paid job.
I have been offered a contract which pays £29k. (i am currently on £25k).

But, to get the £29k i would have to set myself up as a limited company.

Is it really worth going through all the hassle of getting an accountant just to get an extra £4k a year?

I am a sole trader at the moment and a worry of mine is that i would change to a limited company, and what if i do not like the
role? Then i have to change back to a sole trader..

What are people's thoughts?


Regards

You will need 2 years accounts to be able to apply for most mortgages showing a steady income stream. My advice would be to get the mortgage first then go contracting.

You may get a first time mortgage without having 2 years, but it's unlikely to be a good rate. When I last spoke to a mortgage advisor whether I should sit on my current rate of 1.69% or remortgage on my new contractor salary, he told me call back when I had 2 years of accounts.

Saying that, this is not a good climate for savers. Minimalise your outgoings every way you can, manage your money as smartly as possible and say good bye to any social life that involves "going out" unless you like walks in the woods with friends. Your own personal bank accounts will likely as not be scrutinised by your mortgage company. Your bank balance and broker will thank you if you keep your expenditure as close to 0 as possible.

PasturesNew

IMHO it's not worth it.

You lose the stability of the permanent job on mortgage applications. And, £4k is nothing - you need to pay employers' NI and your own holiday pay etc ... and an accountant. You'll end up worse off.

In any case, for 1 year or so, I'd have gone with an umbrella company.

But .... my tuppence is: £4k extra as a contractor will cost you more in stuff you haven't a clue (yet) you have to pay out compared to permanent employment.

Don't do it. If you ARE going down that route, then you need to aim much higher as an invoiceable rate to be ahead.