My Guide to Software Engineering Contracting in UK • Hacker News Board

Re: My Guide to Software Engineering Contracting in UK

#71

Post by questinthrow » Mon, Mar 11, 2024, 7:18 AM UTC

codedokode wrote: post #61

sirsinsalot wrote: post #12

Earlier quoted context omitted.

Also your number one skill is communication. If you're not liked, your services are less valuable. Number two skill is negotiating. The technical stuff starts much further down the list.

Does it mean that UK companies are in need for likeable people who are good at negotiating rather than have good technical skills?

Without a doubt, most people I know in this business optimize for networking and communication. The actual coding is done by eastern europeans and indians. Technical knowledge is more commodifiable than relations.

Re: My Guide to Software Engineering Contracting in UK

#72

Post by ukoki » Mon, Mar 11, 2024, 8:25 AM UTC

harel wrote: post #44

I've been contracting for many years now. It's a good writeup, but as the top comment mentions - these are the basics. There is a lot of nuance. I'm exclusively Outside-IR35, and since this was rolled out to the private sector it dried up a lot of work as companies were spooked for no reason about this. There is still work out there but the market is not as good as it was a year ago. The rates mentioned in this artic…

Mixing inside and outside contracts can be quite tax efficient but requires being diligent. For example, an inside IR35 contract that partially spans two tax years can be used to take the "reasonably cheap" first 50k of salary of each year, with any extra put in a SIPP. Then, outside contracts in the same tax years are used just to accumulate money in a limited company with a view to withdraw funds via BADR at some point, and potentially used to top up the SIPP as well.

Re: My Guide to Software Engineering Contracting in UK

#73

Post by ukoki » Mon, Mar 11, 2024, 8:34 AM UTC

nerdawson wrote: post #55

There’s far more work inside IR35 than outside. If you’re going to work inside, just use an umbrella. The margin they take is minimal and they make life so much easier. If you’re going to run a limited company, you have to actually run a limited company. There are horror stories on the contractor forums where HMRC have taken a dim view of contractors whose companies are essentially run by their accountants. I can’t r…

The horror stories are from contractors who have attempted to cheat the tax system by eg making loans from their limited companies that they never intended to pay back, or who claim company expenses for personal benefit.

You can stay well within the tax code and avoid any grey areas, and will still get more income by operating as a limited company. Yes running a limited company requires some admin work, learning about the tax system but a few of hours admin a month is well worth the extra £20k net income (or whatever the figure happens to be)

Re: My Guide to Software Engineering Contracting in UK

#74

Post by bdjsiqoocwk » Mon, Mar 11, 2024, 8:36 AM UTC

toyg wrote: post #53

UK-Al05 wrote: post #47

Earlier quoted context omitted.

Self employed Plumbers can earn about the same as developers in the UK.

And likely don't need to master a new type of plumbing every other year.

Sounds great for people who don't want to keep learning!

Re: My Guide to Software Engineering Contracting in UK

#75

Post by ukoki » Mon, Mar 11, 2024, 8:37 AM UTC

jacobp100 wrote: post #13

I found the yearly take home for outside IR35 contracts is around 220 * day rate, inside is 200. I did find recently that the contract rates have gone down a lot, and the full time salaries increased - so I'm back perm after about 8 years, and am better off having done so. I found jobserve.co.uk good for contract roles though

The benefit really depends on the rate. When you get near the 1000/day range outside becomes far more lucrative than inside due to the flexibility it gives you for tax planning, as you can defer personal income to a future date where it can be taken in a more tax-favourable way (eg via SIPP or BADR).

Re: My Guide to Software Engineering Contracting in UK

#76

Post by davidwritesbugs » Mon, Mar 11, 2024, 9:33 AM UTC

karaterobot wrote: post #50

I was a software contractor in Seattle for 13+ years, pretty much all of this holds true for that area as well, and I assume most of the U.S. at least. > If you turn up and are rubbish, your contract will be terminated really quick. And if there are layoffs, contractors would (sometimes) already be well gone already. This is one piece of advice I haven't found to be the case. I have told the following lies as a contr…

>you can get away with tap-dancing for a while

Spits out coffee. Beautiful. If you made that you deserve a prize.

Re: My Guide to Software Engineering Contracting in UK

#77

Post by harel » Mon, Mar 11, 2024, 10:02 AM UTC

ukoki wrote: post #72

harel wrote: post #44

I've been contracting for many years now. It's a good writeup, but as the top comment mentions - these are the basics. There is a lot of nuance. I'm exclusively Outside-IR35, and since this was rolled out to the private sector it dried up a lot of work as companies were spooked for no reason about this. There is still work out there but the market is not as good as it was a year ago. The rates mentioned in this artic…

Mixing inside and outside contracts can be quite tax efficient but requires being diligent. For example, an inside IR35 contract that partially spans two tax years can be used to take the "reasonably cheap" first 50k of salary of each year, with any extra put in a SIPP. Then, outside contracts in the same tax years are used just to accumulate money in a limited company with a view to withdraw funds via BADR at some p…

Interesting approach. My personal case is more complicated but this is still interesting. As an aside, my accountant raises a point that mixing might raise some flags with HMRC regarding status.

Re: My Guide to Software Engineering Contracting in UK

#78

Post by nerdawson » Mon, Mar 11, 2024, 10:59 AM UTC

ukoki wrote: post #73

nerdawson wrote: post #55

There’s far more work inside IR35 than outside. If you’re going to work inside, just use an umbrella. The margin they take is minimal and they make life so much easier. If you’re going to run a limited company, you have to actually run a limited company. There are horror stories on the contractor forums where HMRC have taken a dim view of contractors whose companies are essentially run by their accountants. I can’t r…

The horror stories are from contractors who have attempted to cheat the tax system by eg making loans from their limited companies that they never intended to pay back, or who claim company expenses for personal benefit. You can stay well within the tax code and avoid any grey areas, and will still get more income by operating as a limited company. Yes running a limited company requires some admin work, learning abou…

> The horror stories are from contractors who have attempted to cheat the tax system

Some are, certainly. Many are not.

The example I gave is people who setup a limited company in order to take on work as a contractor. They've gone to an accountancy firm who've told them we'll do all the work for you. HMRC have then turned around and said that the company is a sham. Again, I can't remember the name of that particular problem but it's well known on a popular UK contracting forum.

The deeper you dig into IR35, the murkier it becomes. Contracts are dismissed for instance and it's actual working practices that are reviewed. There are absurd rules around control which are far too vague and subject to opinion that it could easily be argued either way.

Re: My Guide to Software Engineering Contracting in UK

#79

Post by ukoki » Mon, Mar 11, 2024, 11:05 AM UTC

harel wrote: post #77

ukoki wrote: post #72

Earlier quoted context omitted.

Mixing inside and outside contracts can be quite tax efficient but requires being diligent. For example, an inside IR35 contract that partially spans two tax years can be used to take the "reasonably cheap" first 50k of salary of each year, with any extra put in a SIPP. Then, outside contracts in the same tax years are used just to accumulate money in a limited company with a view to withdraw funds via BADR at some p…

Interesting approach. My personal case is more complicated but this is still interesting. As an aside, my accountant raises a point that mixing might raise some flags with HMRC regarding status.

Working with a different statuses for the same client should definitely be avoided as HMRC will be sceptical that the working practices are actually different between contracts. Working differnent statuses for different clients shouldn't be an issue IMHO

Re: My Guide to Software Engineering Contracting in UK

#80

Post by nerdawson » Mon, Mar 11, 2024, 11:09 AM UTC

PaulRobinson wrote: post #23

ksahin wrote: post #17

With a limited company generating £100k/year in revenue, I’m curious how much a contractor would earn after salary tax? (assuming no admin/accounting costs)

Put it through a limited company and you’ll pay a lot less than as salary (and PAYE). It’s a weird quirk, but it’s about half the tax roughly. Means you’ll net about £80k minus some small costs. It’s been some years since I did this but an accountant can advise you and help you deal with any national insurance payments need to be dealt with.

I don't believe that's true.

If the company earns £100k/yr, what matters is what you, the individual, actually end up with.

Corporation tax will take you down to ~£80ish but you still need to draw the money out of the company.

Most people will take a small amount as a salary through PAYE to use up their tax free allowances and get the NI stamp. The rest is then paid as dividends.

Your take home pay on £100k would be roughly £67k