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    Chillie in here j.o.s.h.1408's Avatar
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    Software developer contractor

    Hi.

    i am now going to become a contractor instead of perm so i can jump through different companies/projects to help me improve my skillset even further and also earn double or more or on what i currently get as a perm.

    The industry right now is booming. soo many jobs out there for Software developers, i think now is a fantastic time to become a contractor.

    I know some of my software developer friends who are already contractors earning typically i the range of 350-500 per day.

    I am going to do a few things to set myself up in the right legal track so correct me if ma wrong and of course offer any advice and tips along the way.

    1. Create my own limited company(can u help me in this part. is there a website? a place to go to? what are the requirements?)
    2. Create a Business account
    3. Hire an Accountant
    4. Find a contract job


    There are lots of tips already that my friends have told me about like:

    • Pay yourself a lowish salary
    • Pay yourself dividents every quarter or once a year
    • Note down all teh relivent things as expense such as travel card, laptops, phones(developing mobile apps i am doing) So u dont get taxed from those expense



    Cheers all and cant wait to kick start this. I am off on Holiday for a month between mid feb till mid march so i am hoping i can start my new contract at that time when i come back.

    i am on a 3 month notice as well but i have seen others in my company leave for less. what i think i will do is actually possibly hand in my notice soon and ask if i can leave in a month.

    Thanks all

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    Re: Software developer contractor

    Here's a couple of good sites with guides for people new to contracting:

    http://www.contractorcalculator.co.uk/First_Timers.aspx

    http://www.contractoruk.com/first_timers/

    There is info on there about setting up Ltd companies (easy) and the ongoing admin that goes with it (still pretty easy but slightly less so!). You'll also see discussion of alternatives (umbrella companies for example) and discussion of tax. Basically all comes down to whether you want to do your own admin or pay someone else to do it. Finding the different ways to pay yourself and maximise your tax allowances/use lowest rates as you have started to with dividends vs salary is also discussed (also see here: https://www.gov.uk/running-a-limited...imited-company).

    Good luck!

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    Re: Software developer contractor

    There are pitfalls you need to be aware of. One is 'deemed employment' and IR35, which msy apply if you are a 'managed services' company. Another is corporation tax, which is the tax your company will pay on all profits after allowable expenses. If you intend paying yourself a salary, you will need to operate a PAYE scheme. If you register for VAT, you will have operate that too.

    Non of this is complicated, apart from corporation tax, which is very complex, but you might want you give www.hmrc.gov.uk a few hours of your time.

    You need to consider insurance. If you are an employer (which your company will be as you will be be an employee of your Company) you should have employers liability insurance, and you may want to consider Professional Indemnity Insurance.

    As a Director of hour Company, you will be subject to company law, and have statory responsibilities. Have a look at www.companieshouse.gov.uk. The site will also tell you how to set up a company. (Very easy)

    www.pcg.org.uk is worth a look too, particularly with regard to IR35.

    It isn't just a case of keeping track of expenses, you (or your accountant) are required to keep detailed accounts which have to be submitted to HMRC and Companies House (usually st the same time). Not all expenses are deductable.

    With regard to Dividend/salary, salary is a deductable expense, although you will pay tax as part of your company's PAYE scheme. Dividends are not, they are paid after deduction of ct (and have to be declared on your personal tax return, although you get a notional tax allowance for the corporation tax that has been paid)
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    Re: Software developer contractor

    Theres a lot more you need to understand.

    Firstly expenses, your not an MP. You have morals and standards. Expenses are wholy and exclusively for the use of the business. HMRC has lots of rules on this that are worth understanding.

    Things like travel cards often can not be expensesed.

    So really do your homework, but most importantly, don't think its the same as been an employee, with less tax!

    The main thing is that good contractors sell services, not time. There is little point going to be a contractor if you are looking for 350 pd for just been another grunt, yes I know many people do it, but they are silly, a while back I spent a few days helping a friend and his company do some analysis, the value to the company of what I did was low six figures. I charged only low five figures, everyone was happy. That is why you stop been an employ, and start being a service / brand, because it allows you to value more.
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    Re: Software developer contractor

    Quote Originally Posted by Jake_UK View Post
    Here's a couple of good sites with guides for people new to contracting:

    http://www.contractorcalculator.co.uk/First_Timers.aspx

    http://www.contractoruk.com/first_timers/

    There is info on there about setting up Ltd companies (easy) and the ongoing admin that goes with it (still pretty easy but slightly less so!). You'll also see discussion of alternatives (umbrella companies for example) and discussion of tax. Basically all comes down to whether you want to do your own admin or pay someone else to do it. Finding the different ways to pay yourself and maximise your tax allowances/use lowest rates as you have started to with dividends vs salary is also discussed (also see here: https://www.gov.uk/running-a-limited...imited-company).

    Good luck!
    Great thanks for those. im going to take a look.

    Quote Originally Posted by peterb View Post
    There are pitfalls you need to be aware of. One is 'deemed employment' and IR35, which msy apply if you are a 'managed services' company. Another is corporation tax, which is the tax your company will pay on all profits after allowable expenses. If you intend paying yourself a salary, you will need to operate a PAYE scheme. If you register for VAT, you will have operate that too.

    Non of this is complicated, apart from corporation tax, which is very complex, but you might want you give www.hmrc.gov.uk a few hours of your time.

    You need to consider insurance. If you are an employer (which your company will be as you will be be an employee of your Company) you should have employers liability insurance, and you may want to consider Professional Indemnity Insurance.

    As a Director of hour Company, you will be subject to company law, and have statory responsibilities. Have a look at www.companieshouse.gov.uk. The site will also tell you how to set up a company. (Very easy)

    www.pcg.org.uk is worth a look too, particularly with regard to IR35.

    It isn't just a case of keeping track of expenses, you (or your accountant) are required to keep detailed accounts which have to be submitted to HMRC and Companies House (usually st the same time). Not all expenses are deductable.

    With regard to Dividend/salary, salary is a deductable expense, although you will pay tax as part of your company's PAYE scheme. Dividends are not, they are paid after deduction of ct (and have to be declared on your personal tax return, although you get a notional tax allowance for the corporation tax that has been paid)
    I Have been reading up a bit on IR35 and basically it is a legislation that makes sure a contractor doesnt get treated the same as a perm which is understandable.

    what can i do to help me separate and become more as a contractor offering my skillsets for a certain period instead of someone thats employed a s a perm?

    Quote Originally Posted by TheAnimus View Post
    Theres a lot more you need to understand.

    Firstly expenses, your not an MP. You have morals and standards. Expenses are wholy and exclusively for the use of the business. HMRC has lots of rules on this that are worth understanding.

    Things like travel cards often can not be expensesed.

    So really do your homework, but most importantly, don't think its the same as been an employee, with less tax!

    The main thing is that good contractors sell services, not time. There is little point going to be a contractor if you are looking for 350 pd for just been another grunt, yes I know many people do it, but they are silly, a while back I spent a few days helping a friend and his company do some analysis, the value to the company of what I did was low six figures. I charged only low five figures, everyone was happy. That is why you stop been an employ, and start being a service / brand, because it allows you to value more.
    i can buy laptops, computers and mobile gadgets and claim expenses as they are perfectly valid for my business and will do so for my line of work as i develope mobile applications.

    the bit about travel was noted as all the contractors i know claim this as expense.

    my friend even claimed expense for the full package to a flight and accommodation to go and attend the official google conference in san fransisco.

    I am a honest person. always have been but if there is a better logical and honest way of doing something(in this case going contract and doing the stuff i mentioned on my first post) better or cheaper then why not.

    Here are the reasons for doing this.

    i want to move jobs every 6/12 months and not be tied to same old routin, same project etc etc. i want to experience many projects, many ideas etc etc to help me be a far better programmer.

    Salary: We all want to earn nice salaries dont we? so i am not going to go pretend to people here that i dont care about money. i do, we all do so if there is the potential to earn more then why not? i can earn double if not triple what i am earning right now as a perm.


    I also get motivated when i do new stuff, have goals instead of doing grunt work. i always work at my best first 6 months of a new job as usually that is when i am working on new things, new projects but as soon as the grunt mode kicks in i become bored.

    Contract work is perfect for my needs and wants

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    Re: Software developer contractor

    IR35 is complex, you need to read a lot more about it. The intention is to limit managed service companies so that contractors come under 'deemed' employment, so they are treated as permanent staff.

    A lot depends on the contract your Company has with the organisation using your company to provide your services. Right of substitution is important (you can use anyone to provide the service) as well as the way your aims are achieved. Running several contracts at once is also a good thing, as is the level of risk involved - is the risk yours (or your company) (good - for IR35) or the contracting company's (bad for IR35)

    It is an area that requires specialist advice. If you use an agency for obtaining work for your company, they can sometimes offer advice or specimen contracts. However, if you are subject to an IR35 investigation, the onus is on you to demonstrate that you do lot fall within the scope of IR35 legislation.
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    Re: Software developer contractor

    YES YES YES landed my first contract role! 400pd 2month contract!!

    AWSOME. a damm shame contract falls between two public bank holidays!!

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    Re: Software developer contractor

    Well done josh, I'm excited for you

    400/day, 22 days a month, that's £17,600. I bet your mouth is watering already

    Let us know how it goes.

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    Re: Software developer contractor

    Quote Originally Posted by billythewiz View Post
    Well done josh, I'm excited for you

    400/day, 22 days a month, that's £17,600. I bet your mouth is watering already

    Let us know how it goes.
    Minus bank holidays
    Minus ~ 2 days/month holiday (you don't get paid holidays as a contractor)
    Minus any time off sick (you don't get paid sick as a contractor)
    Minus corp tax
    Minus income tax
    Minus employer's NI
    Minus employee's NI
    Minus public liability insurane
    Minus professional indemnity insurance
    Minus accountancy fees
    Minus any pension contributions
    Minus professional contract reviews

    ...and all with a 0 day notice period, and no guarantee of any further work. It's not quite as black and white as day rate * number of days in the month. Don't go buying that Porsche just yet.

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    Re: Software developer contractor

    Quote Originally Posted by b0redom View Post
    Minus bank holidays
    Minus ~ 2 days/month holiday (you don't get paid holidays as a contractor)
    Minus any time off sick (you don't get paid sick as a contractor)
    Minus corp tax
    Minus income tax
    Minus employer's NI
    Minus employee's NI
    Minus public liability insurane
    Minus professional indemnity insurance
    Minus accountancy fees
    Minus any pension contributions
    Minus professional contract reviews

    ...and all with a 0 day notice period, and no guarantee of any further work. It's not quite as black and white as day rate * number of days in the month. Don't go buying that Porsche just yet.
    Even if u minus all that I am getting paid more then double a perms salary

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    Re: Software developer contractor

    I never bothered with a ltd company myself. There are a couple of 'umbrella' companies out there that handle payments for you (for a small fee of course). Getting a good accountant has been one of the best decisions I made also.
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    Re: Software developer contractor

    Quote Originally Posted by yamangman View Post
    I never bothered with a ltd company myself. There are a couple of 'umbrella' companies out there that handle payments for you (for a small fee of course). Getting a good accountant has been one of the best decisions I made also.
    A good accountant would advise you to make you own Ltd. If you are contacting for the long run

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    Re: Software developer contractor

    I remember when I was young asking an old contractor if I was ready to go contracting. He said "if you have to ask, you're not ready."

    I've always wanted to contract (IT developer). The excitement, the glamour, the women ..... or something like that .
    5 years ago I got made redundant (Lehman Brothers). I was unemployed for 3 months and then like proverbial buses I got offered 3 jobs in 2 days. To this day I still can't believe that I turned down the 600/day offer.
    I joined a startup. It was like the wild west in the early days but it's paid off. Maybe I'll fulfil my ambition one day, when I'm old and enigmatic

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    Re: Software developer contractor

    Quote Originally Posted by j.o.s.h.1408 View Post
    A good accountant would advise you to make you own Ltd. If you are contacting for the long run

    You don't necessarily need to pay heed to it .
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    Re: Software developer contractor

    Quote Originally Posted by billythewiz View Post
    I remember when I was young asking an old contractor if I was ready to go contracting. He said "if you have to ask, you're not ready."

    I've always wanted to contract (IT developer). The excitement, the glamour, the women ..... or something like that .
    5 years ago I got made redundant (Lehman Brothers). I was unemployed for 3 months and then like proverbial buses I got offered 3 jobs in 2 days. To this day I still can't believe that I turned down the 600/day offer.
    I joined a startup. It was like the wild west in the early days but it's paid off. Maybe I'll fulfil my ambition one day, when I'm old and enigmatic
    You turned down 600pd?

    crazy

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    Re: Software developer contractor

    Quote Originally Posted by j.o.s.h.1408 View Post
    You turned down 600pd?

    crazy
    Money isn't everything, there's job satisfaction, length of contract, whether you can actually do the work etc.

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