I've heard that in the UK, it's much more advantageous to work as a contractor than a full-time employee. Is there any truth to that? What advice would HN offer to a US-based developer looking to move to the UK?
Becoming a contractor programmer in the UK
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Re: Becoming a contractor programmer in the UK
#72Good advice, especially the bit about crunch. First time I contracted I let my accountant talk me into using their horrible spreadsheet. I couldn't make my self use it it was that bad and my accounts were a mess. Now my accountant (nimble jack) bundles freeagent (which when I looked into it was better than crunch and has an API) and keeping on top of things is much easier. One additional thing: If you're married make…
If you split up, your spouse will take half the money in your business account with them if it's 50-50...
They would happen anyway as part of any divorce settlement and may get more if you have children.
Tax planning really should not be a reason to go contracting. You can get more money by moving to another permanent job elsewhere.
Valid reasons to me for going contracting would be to remain technical, to continue learning new technologies, to avoid permie politics and appraisals (which is why I contract)..
Re: Becoming a contractor programmer in the UK
#73My advice would be to use an umbrella company and let them deal with all the tax hassles - they have an entire staff purely for this. You will take home slightly less (no opportunity for tax "optimisation" but I disagree with that on principle anyway) but then also have no exposure to HMRC coming after you 6 years later saying "Where's our £10,000?" (has happened to several people I know.) (edit for spelling)
Oh the joys of IR35 and its old ability to attract people into tax avoidance schemes instead of setting up limited companies....
My advice and I've repeated it continually on Contractor UK for years is to only use a proper umbrella company or use a limited company.
If someone says you'll receive more than 65-70% of you contract value from a umbrella company or more than 80% from a limited company they are just lying to you and wish to use your greed to initially grab money off you and then let HMRC take you to court...
For details on proper umbrella companies see http://www.allumbrellacompaniesareequal.com/ . But if you are planning to do this long term start a limited company....
Re: Becoming a contractor programmer in the UK
#74As a contractor of many years standing (I started contracting when the internet appeared in 1994) I started reading the article hoping it was correct and finished it with my fingers covering my eyes in fear. Sadly I don't have time to correct many of the misconceptions and total inaccuracies it contains. Its a shame really as good articles are hard to find and I'm sure many americans would find the differences betwee…
It would be a lot more useful if said what these misconceptions and inaccuracies were. It seemed generally accurate to me. I think you should either back up this comment or delete it; otherwise it's unfair to the author.
(I don't mind to sound snarky here; the rest of your comment is genuinely helpful).
Re: Becoming a contractor programmer in the UK
#75>A service like www.companiesmadesimple.com (aff.) will make the incorporation process easy. It usually takes up to three business hours.
Yeah, better do it yourself. I'm from Germany and I set up a LTD directly with Companies House myself. It's really (I mean really really) straight forward and they even accept PayPal to pay the 15 GBP fee. It took me ~20 minutes and the company was incorporated the next day.
Those formation companies usually just are an unnecessary middleman.
Re: Becoming a contractor programmer in the UK
#76Earlier quoted context omitted.
/Nursie - companies that provide registration services save time. If you have time, you can diy registration, right. But generally they provide very convenient service. Besides, services like 9-10 Adam Street can also provide you conference rooms, club place etc., in addition to registration. There are many companies that will help you open Ltd in the UK fast, and very few that will help you to close the once opened…
I was just looking at the site linked from the howto and couldn't see what they were giving me that using companies house directly didn't, for the simple case of company registration. I haven't been through shutdown yet, so I'll take your word for it (and everyone else's!) that it's painful...
>I was just looking at the site linked from the howto and couldn't see what they were giving me that using companies house directly didn't
Worse they give you usually less as many formation companies keep the "webfiling auth code" for themselves and you will have to do all Companies House related administrative tasks through them (most likely for a fee).
Retrieving your webfiling code in that case is just hassle you wouldn't have had if you incorporated yourself in the first place.
Re: Becoming a contractor programmer in the UK
#77Earlier quoted context omitted.
You disagree with following the letter of the law and taking home extra thousands of pounds per year? Personally my attitude it that I'll apply whatever optimizations my accountant says I can without being too creative :-) Also, some companies that masquerade as umbrellas are doing some pretty shady things. If they promise some un-feasibly large percentage of take home pay (over 80%) they're probably doing some dodgy…
It's a moral/ethical stance, I guess - tax funds social infrastructure and I think we need more of that. Good point about the shady "base pay + loan you never* have to repay" shenanigans - I suspect HMRC will be onto them soon enough though.
>It's a moral/ethical stance, I guess - tax funds social infrastructure and I think we need more of that.
Then donate that "optimized" tax money to a charity where it does more good than being pumped in some governmental megaproject that burns most of its funding just on overhead.
Re: Becoming a contractor programmer in the UK
#78>A service like www.companiesmadesimple.com (aff.) will make the incorporation process easy. It usually takes up to three business hours. Yeah, better do it yourself. I'm from Germany and I set up a LTD directly with Companies House myself. It's really (I mean really really) straight forward and they even accept PayPal to pay the 15 GBP fee. It took me ~20 minutes and the company was incorporated the next day. Those…
The formation companies are a left over from when it was quite hard
Re: Becoming a contractor programmer in the UK
#79As a contractor of many years standing (I started contracting when the internet appeared in 1994) I started reading the article hoping it was correct and finished it with my fingers covering my eyes in fear. Sadly I don't have time to correct many of the misconceptions and total inaccuracies it contains. Its a shame really as good articles are hard to find and I'm sure many americans would find the differences betwee…
It would be a lot more useful if said what these misconceptions and inaccuracies were. It seemed generally accurate to me. I think you should either back up this comment or delete it; otherwise it's unfair to the author. (I don't mind to sound snarky here; the rest of your comment is genuinely helpful).
You should absolutely not have your business bank with the same bank you use personally.
If your business account ever gets frozen (for litigation, tax investigation, etc.) many banks will also freeze any personal accounts you hold with them.
IMO many of the services he recommends also suck. I've used Crunch before and wouldn't recommend it and Barclays Business banking has a terrible reputation. £50 cashback isn't a good basis on which to chose a bank account. Get a proper accountant that specialises in contractors (Nixon Williams and SJD have decent reputations).
It also doesn't address withdrawing money out of the company (taxes, NI, pension, etc) which is a fairly important part of being a contractor.
Re: Becoming a contractor programmer in the UK
#80As a contractor of many years standing (I started contracting when the internet appeared in 1994) I started reading the article hoping it was correct and finished it with my fingers covering my eyes in fear. Sadly I don't have time to correct many of the misconceptions and total inaccuracies it contains. Its a shame really as good articles are hard to find and I'm sure many americans would find the differences betwee…
It would be a lot more useful if said what these misconceptions and inaccuracies were. It seemed generally accurate to me. I think you should either back up this comment or delete it; otherwise it's unfair to the author. (I don't mind to sound snarky here; the rest of your comment is genuinely helpful).
Where to begin
Am I ready - The biggest bit is actually having the confidence to do it and a CV good that will get you past both the gatekeeper (the agent) and the client checking CVs... That means you should have real experience across both multiple employers and multiple market sectors (retail, consultancy, banking for instance) before thinking about it.
Timing -
Never understood this one. Projects have different life cycles so require analysts before project managers before developers before testers.
Outside of the week between Christmas and New Year there are always some companies looking to start projects or requiring another contractor to fix a problem. In fact the only time I've found it difficult to get work is in April which supposedly is a boom period due to new financial years...
Bureaucracy -
The easiest way to find contracts is through agencies. To do that you need either a limited company or to use an umbrella. You don't however need to create this before you get a contract as you can get a company created in about 4 hours..
Getting an accountant
You need one but don't need 1 until you get that first contract. Crunch has a lovely interface and is a good site but frankly I don't think they would be that great if things went wrong as they haven't got many qualified accountants. Look at IPSE or Freeagent for many other possible options..
Registering for VAT
On the flat rate scheme you don't keep 5.5% but rather .2 *.145 or 2.6% as the 14.5 is taken from the income including VAT..
Expenses
You don't need to do anything until you have a contract (as I've continually said setting up a company can be done in 4 hours). You may need to wait before you get paid (although some agencies still pay weekly) but if that is the case you keep the expenses to a minimum, keep a record of them and take the money from the company as soon as it receives that money.
Finding your first client
The first client isn't the hardest. The second one is. Especially when your first client was a short term 3 month contract and they didn't renew you because the work was done. With 1 3 month contract under your belt you then start looking for a contract as your money starts running out. That is when things are difficult.
And I'm out of time but just before I go
Mailing lists and communities
This is my real problem with this article. He doesn't seem to want to be a contractor. He wants to be a freelancer working for multiple companies on various projects. Perfectly acceptable but thats the world of code bunnies doing work for start-ups and advertising agencies rather than contracting in a consultancy firm or government department.