8 ms·

Becoming a contractor programmer in the UK

232 points by timooo 11y ago

blueblueblue 11y ago
What does everyone do with the cash in their ltd company? My acct advises leaving the cash in the company but HMRC seem arsey about investing directly rather than moving it into an ISA which obviously then incurs an income tax hit.
- astannard 11y ago
  Generally you would start a Business Account, Barclays are good. You then pay yourself from your company but at a much lower rate than your company gets paid say an annual salary of £10,000. This will cause money to build up in your company account which you pay to yourself as dividends which are more tax efficient to get your money out. This is why most contractor use an accountant to manage the payroll etc
warrenmiller 11y ago
Crunch are aces.
- astannard 11y ago
  inniAccounts are good too but I am very biased as I work for them.
- cjrp 11y ago
  I've found their webapp to be pretty good, but trying to get actual financial advice was a struggle since you have to go through your account manager rather than talk directly to a real accountant.
  - ownagefool 11y ago
    I use Maslins who provide freeagent. They respond emails within the hour usually.
junto 11y ago
Previous discussion: https://news.ycombinator.com/item?id=9726182 https://news.ycombinator.com/item?id=9726182
CharlesFinley 11y ago
The old discussion is now closed. You should be aware that there is no obligation for limited companies to have a business bank account. However, it is usually a good idea to have one. Furthermore, you don't need to be a UK resident to open a business bank account but most banks will not deal with you due to higher costs and fraud concerns. P.S. your company does not require a UK-based bank account. You can open a business bank account in your country in the name of your LTD company in the UK. You will need to have your company documents (Certificate of Incorporation and Memorandum & Articles of Association) apostilled.
- batou 11y ago
  Very true. Also the advice about marketing yourself is crap. Recruiters are the #1 way of landing contracts. They're finders and you're paying a finders fee for that service. They have the big guys with oodles of cash to get hold of. If you can't get a gig through a recruiter then you either don't have skills that are in demand or don't come across as someone who they'd want to sell. If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway. If you're sneaky about it, you and the recruiter can get the client to pay the finder's fee. Once you're in the system, build up a network of contacts and then move through that rather than using the recruiters. I'm doing that at the moment and ended up taking a perm position that was better paid than the contract rates were (without all the hassle of IR35, rolling a Ltd etc)
  - jacquesm 11y ago
    > If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway. I've never used a recruiter, the companies I work for paid pretty good and I had one unpaid bill in a couple of decades. Building your own network and getting rid of recruiters as your main source of income is very important to new contract programmers. For one they take a cut and for another they will sell those parties where they can take the largest cut first. I'm not saying they don't have a function but recruiters goals and the recruited goals are not 100% aligned and you should be very much aware of that when using one. One way to side-step recruiters is to build up (large) number of contacts with people in the industry who may get to know someone that needs your particular skillset. The more peculiar your skills the harder it will be for recruiters to place you and so more of the acquisition part will have to be done by yourself. Think of using recruiters as 'outsourcing acquisition', it has all the upsides and the downsides associated with all other forms of outsourcing. Another danger with outsourcing your acquisition to recruiters is that you are handing the keys to one of the most important parts of your business to another party, who can then either cut you off at will, replace you and retain their contact with the company you were placed in and so on. The sales department (which you've essentially outsourced) is a very important (if not the most important) element in any company, even a small one. You may be able to make your life a little easier by not doing that work, especially if you're an introvert but in the longer term you're setting yourself up in a very dangerous position. So, use recruiters if you have to but be wary and make sure you have alternative channels to being hired under your own control. Never let a single recruiter get you all of your jobs or even a majority of your jobs.
gedrap 11y ago
Pretty good and brief summary about UK specific details, thanks for sharing :)
jackgavigan 11y ago
The previous discussion - https://news.ycombinator.com/item?id=9726182 https://news.ycombinator.com/item?id=9726182 - should be read alongside this page. It had a number of glaring errors, including some very bad advice about tax.
peteretep 11y ago
> You should have savings to cover at least 4 months of > your usual expenses. You will spend some money > establishing a company. It may take several weeks to > find your first contract. If you wanted to be extra safe, sure. I made the switch when I was heavily in debt, and it helped me get out of debt, so YMMV. > A service like www.formationsfactory.co.uk will make the > incorporation process easy. Actually it's super easy online using the UK government sites now. I set up a company (again) about ~14 months ago, and it took about an hour of filling in .gov.uk forms online. I would recommend just doing it yourself. Setting up a bank account is pretty easy too, and I'm not sure why you'd use a third party for it. 15 minutes of filling out HSBC forms did it for me. > Finding your first client might be hard. Sure. Most permanent jobs have a 4 week notice period, and you can find contractor roles happy for you to start in 4 weeks. Line one up before you quit, and there's no 2-3 week mad rushing around trying to find a contract. If you're just getting in to it, start with a recruiter. They'll eat in to your contract rate, for sure, but they'll also have a far better visibility of the market than you, they'll get better feedback from clients than you, and they'll help chase your invoices and so on. I worked as a contractor for a long time and never had a bad experience with a recruiter, where the OP seems to have had a dreadful time... > rates Go look on jobsite. For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing. > IR35 In addition to IR35, they're about to massively change how dividend tax works. You might be better off looking at an umbrella company like Giant, who'll save you a lot of accounting hassles...
- dspillett 11y ago
  > Most permanent jobs have a 4 week notice period Really? In experienced level dev jobs? Most of the people I know are on two months notice. Three months, which is what I'm tied to, doesn't seem uncommon for senior devs/DBAs/similar.
  - peteretep 11y ago
    That's been my experience when hiring people. I only hired one person with a 12 week notice, everyone else was 4 weeks. YMMV, I guess.
Dakuan 11y ago
Worth pointing out that that tax regulations are changing and contracting could become a lot less lucrative from April 2016. Best jump in now before its too late!
colinramsay 11y ago
This is the easy bit. Finding quality, well paid work, that's the hard bit. It renders all the rest of it a bit irrelevant.
- peteretep 11y ago
  My experience (and that of many coworkers I've had) - unless you've really pissed in the pool, there is an unending supply of good contracts in London.
  - colinramsay 11y ago
    Perhaps true but: - Are any remote? I mean who wants to live in London? ;) - How do you find them in the first place?
    - peteretep 11y ago
      > - Are any remote? I mean who wants to live in London? ;) Generally not. One of my current clients allows their normal contractors to do 50% working from home. > - How do you find them in the first place? Recruiters and IRC
  - squinn2 11y ago
    Anyone know what the market's like for embedded s/w development these days? ~ 15 years ago (ouch) recall we were using a lot of contractors for protracted periods & had to keep them sweet for fear they might just skip off to another job. Didn't make the transition then. Always wondered ..
    - pyb 11y ago
      Embedded contracting in the UK is dead atm. I found that in the field, most contract vacancies from agents are fake. As for the few hw startups, they're mostly unfunded.
yetanotheracc 11y ago
What are the benefits of incorporating an Ltd vs being a sole trader?
- peteretep 11y ago
  There are significant tax savings, and theoretically limited liability. The significant tax savings will change next tax year with changes in dividend taxes and NIC contributions. No-one is really sure of the actual impact at this point.
  - nikon 11y ago
    7.5% on your dividends. About 3k a year for a 100k earner... Nothing to go permie about.
    - peteretep 11y ago
      I had thought the jury was still out on this - I do hope it ends up being only that amount though.
      - logiclabs 11y ago
        The rates for dividend payments are set but because of the triple changes of the budget - dividends, employment allowance and travel/subsistence expenses, it could affect some contractors a lot worse than others. Though it's mostly those who rack up large commuting/accommodation expenses chasing high paid work in London while not living anywhere near there. The travel/subsistence rules haven't been set yet but it's likely HMRC will crack down on them quite hard.
  - benashford 11y ago
    There's a calculator here: http://www.hl.co.uk/news/articles/budget-2015-changes-to-dividend-tax-explained http://www.hl.co.uk/news/articles/budget-2015-changes-to-div...
- mostlystatic 11y ago
andy_ppp 11y ago
One important thing to note is that your accountant gets a kickback from setting up a bank account. You should instead aim to search for the best bank account you can find with the best deal and the faster payments service; my bank account with Cater Allen still does not support this for example. I'd also highly highly recommend freeagent which is so good it makes you wonder what your accountant does. It has been right where my accountant has often been wrong!! Here's a referral link: http://fre.ag/34atijdc http://fre.ag/34atijdc
- tome 11y ago
  Freeagent looks interesting. What's their customer support like? My accountant is about 90 GBP per month but I get extremely prompt responses from them on technical issues so I'm inclined to think they're worth it.
  - andy_ppp 11y ago
    Freeagent have always responded pretty immediately but it's best to get an accountant [1] that supports Freeagent and you are then effectively paying for support. They use Get Satisfaction which is community and vendor run support [2]. It makes the accountants life a lot easier too (they get a slightly restricted login). [1] http://www.freeagent.com/find-an-accountant http://www.freeagent.com/find-an-accountant [2] http://community.freeagent.com/freeagent http://community.freeagent.com/freeagent
  - peteretep 11y ago
    My accountant is the same, and gives me a discounted version of FreeAgent. These days I have considerably more complicated needs than I used to doing simply contracting, but I'd probably still use FA + the accountant anyway. I pair it with ReceiptBank, with which there is an acceptable (but not great) integration.
yetanotheracc 11y ago
Compared to full-time positions of equivalent scope, what skill level and experience is needed to work as a contractor? How do the working conditions differ?
- gadders 11y ago
  My experience is specific to banking, but interms of working conditions they are more or less identical, apart from the odd "contractor furlough" when contractors are forced to take unpaid leave (normally around the Christmas perioid).
- brc 11y ago
  In my experience, sometimes they wanted more skill and experience for a permanent role than they did for a contractor. I worked as a contractor and had to fill headcount, and the process was different for a contractor and a permanent. Contractors are much simpler to get rid of if they don't turn out, so hiring decisions were made faster. Permanent people being hired had to be of a higher standard. This doesn't mean that you can get away with being a junior in a senior role, but it might mean there is more of a focus on technical skills rather than university qualifications, that type of thing. There are some crap contractors floating about the system and some crap permanent employees. And vice versa. The working conditions are almost identical, except that in a downturn the contractors will be first out the door. They also get to avoid 'company building' meetings and crap like that.
jacquesm 11y ago
I wrote a whole series of pages on this subject condensing the last 30 years or so: http://jacquesmattheij.com/be-consultant/ http://jacquesmattheij.com/be-consultant/ The idea was to one day bind this all together and make it a book.
- peteretep 11y ago
  Contracting in a UK sense is really very different from consulting or freelancing. It's essentially just a 9-5 short-term job, usually on-site, with more money and some extra accountancy perks.
  - jacquesm 11y ago
    I see more things in common than differences between those and I know people in the UK that use contract work to supplement their income when their consulting/freelancing gigs are not plentiful enough.
ravibhatt 11y ago
Adding my two cents. I have been a contractor for almost 3 years now. My personal opinion: - Contracting pays a lot more than a perm role. - You do not deal with politics, which is a major plus for me. - You do not hear about you not getting your promised y% bonus because company did not do x% business. - You are not worried about 'changing the world', the way you would in a startup. - working 4-6 years your asses off at a startup may be equivalent to working as a contractor for that time. That is a big may be, your skills, confidence, market everything plays a big role. - Always get a good accountant, go for ltd company, enroll your wife and PAY YOUR TAXES! - I started when i had about a month's savings, and it worked out well. - Day rates depend on your skill set. 350 is the minimum i guess for any role, max is your imagination! 800? 1000? but getting 500-550 should be the target at least. - Getting a contract is tricky: use linkedin, recruiters, friends and whatever else. All are necessary. I would not worry too much about a recruiter getting a cut as long as i get what i had asked for. - Get a contract before quitting your perm role. Mostly companies looking for a contractor wait for 2 weeks, if you are good and your skills are in demand they would wait for 3-4 weeks. - Always plan your vacation at times when everyone else is on holiday. December/January and April are good times. - HMRC website is good enough to register a company, 15 pounds and 20-30 mins. - Getting 450 a day is always better than siting idle waiting for that 550-600 a day contract. - There is lot of competition, be prepared for that. - Prepared for some level of stress (specially when you are out of work), it is still worth it. - Do not worry too much about your utilization in a contract, it is the client's worry. You are paid for your skills and not your time. Do put reasonable time, but that is not the criteria you were hired with. - 'Doing/Completing my time' is a BS. I have had several contracts and none of the clients ever had problems with my timings. And i am particularly bad at working normal hours. Sometimes i get at work at 10 and leave at 5. At times i work whole nights. - Recruiters are lairs, don't give too much info. Ask for a job spec and day rate before giving any info. I would help you, after you get me a contract! - Send your CV to all who asks for it. Keeps you in the market. - You will not necessarily get a higher day rate if you went directly with a client. Your day rate depends on your skills and negotiating skills only. If you do not ask for a good day rate, chances are, you wont get it. - Sometimes, leave it on Luck. We can be the smartest asses on the planet, but at times need luck. Hope this helps.
- 11y ago
nikon 11y ago
I think regardless of the tax benefits discussed in this thread, even with an equal playing field you will earn significantly more than your permie peers. You can get 50k if you're lucky in London, but you can earn 500 a day as a contractor. 500 * 230 conservative work days per year = 115,000 NET
- eterm 11y ago
  230 work days aren't "conservative", that's 4.5 days/week. Given the legal minimum of 28 days holiday per year for permanent employees (28 includes bank holidays, often you'll find vacation quoted as 20 days which doesn't include the bank holidays), that's close to 100% "found work" rate.
  - scalesolved 11y ago
    Ten weeks holiday and still earning over 100k contracting a year at £500 a day. Obviously not everyone has a contract all the time but from my friends that do contract they almost always are working (and they are outside the market hungry center that is London)
    - jakub_g 11y ago
      Speaking about holidays, what's the employers' attitude towards days off say on a 3 or 6 months contract? Can you take a week or two off during a 3 month contract or you are generally expected to work the full contract time?
      - medwezys 11y ago
        Clients can't prevent you from taking time off, you have a complete freedom to choose how much you work in theory. Having said that taking a week or more off during a 3 month contract will no be expected by most of the clients. Taking a day or two off is usually not a problem. It really depends on the client.
      - gaius 11y ago
        You can take as much holiday as you want, between contracts. I know a few who regularly head off for 1-3 months at a time, between working.
jheriko 11y ago
wasn't this here only a few days ago already? fwiw i've jumped into this sort of work before without any savings or backup plans... it was much more 'exciting'. XD
codeshaman 11y ago
Great article, very thoughtful. But my biggest question is where do you find a client ? Is there a website (like a jobs website) for contract work, besides elance and the like ? Yeah, I can google it, but it's usually just a waste of time. Is there any serious place where an experienced developer can meet serious clients ? I mean clients willing to pay for quality work so I can make a living similar to a corporate job ?
- iyra72 11y ago
  As a very young programmer looking to make some money along his studies in the UK, I want to know where I can find clients, or even start a portfolio that's more than a few open source projects on GitHub.
  - ceeK 11y ago
    I posted an offer to HN to build their app for £100. Monetary value is obviously very little, but it's a token gesture that technically gives you freelance experience. It was great to build my portfolio up; I'd recommend it if possible. It's much easier to land gigs with a freelance portfolio. https://news.ycombinator.com/item?id=6382405 https://news.ycombinator.com/item?id=6382405
  - mtberatwork 11y ago
    I would have a look around for developer job postings at your university instead of trying to track down and maintain commercial contracts.
- sklogic 11y ago
  I do not know anyone who started as a contractor. Everyone I know (myself included) moved to contracting after maturing for several years in the industry, building up a reputation and a network of contacts.
  - ownagefool 11y ago
    There are such a thing as junior contractors, they tend not to get amazing rates, but they'll still be doing a lot better than what they would on 13k a year, and they can quickly negotiate better rates. I was perm for like 5-6 years, I think building your skills in perm roles is how it should be, but I'd probably have a lot more money if I'd just became a contractor.
hanoz 11y ago
Contrary to the advice, you do not need an accountant, especially if you are able to ignore another part of the advice and not register for VAT (if your turnover is below the registration threshold of £82,000) which simplifies the accounting greatly. Your duties are then mainly as follows: Use HMRC PAYE Tools to report each salary payment you make, and pay any National Insurance if applicable (which it won't be if you keep you salary below £671 a month). Use the same tool to report any expense payments each May (form P11D). Use Companies House WebFiling to submit your annual return (a short submission confirming some details about your company's directors and shareholdings etc.) each company year end. Use HRMC's Online services to submit your corporation tax and accounts nine months after each year end. I pay £45 each year for collection of Excel templates from http://www.diyaccounting.co.uk/ http://www.diyaccounting.co.uk/ to record my accounts which produces a mockup of the HMRC web form with the fields filled in. Pay yourself a dividend one or twice a year and find a Word template to print out a record of the payment and the board meeting you had to decide on it. Finally, use HMRC Online Self Assessment to submit your personal tax return each January, which you may already be doing anyway. Looking at all this now it seems like a lot, but it's not as bad it sounds. I suppose you've got to have something of an interest in learning how a business is run to justify it. On the other hand you can save your company a tidy sum, plus as a company director you're legally responsible for the accuracy of the various submissions anyway, whether an accountant does it all for you or not, so you may as well have a sound understanding of it all I say. Also, I don't know whether this is the really the case or not but I've a theory that the more you run your operation like a proper business the less likely you're going to come a cropper of an IR45 disguised employment judgement, which could be severely financially damaging. Running your own operation like this will put you in a better position for trying out any side projects I believe, and of course it will all stand you in good stead when you finally hit on the world changing idea you've been waiting for and your one man band blossoms into a large corporation (although do then get some accountants - but at least you'll have some idea what they're up to).
- SmellyGeekBoy 11y ago
  Absolutely solid advice here. This is exactly what I do as a one man band.
- 11y ago
borplk 11y ago
Is there an Australian version of this somewhere? I wish people would replicate this for as many countries as possible.
- JacobAldridge 11y ago
  The IR35 related laws in the UK make independent contracting much easier and therefore more common there than in Australia. As I understand it, many UK contractors would be considered employees under Australian law. Having run my business in Australia and then the UK, I asked the founder of Crunch in the UK (Accounting support for contractors) if he planned to expand to Australia because I loved their service. While open to it at some point, iirc he said there just wasn't the volume of potential clients down under to justify the legislation and recruitment investment.
acaloiar 11y ago
As others have noted, the 4 months of living expenses requirement can be quite excessive. I've seen similar advice in the past and can't help but recall my personal anecdote of starting a company with barely enough money for one month of expenses. What is far more vital to one's success as a solo contractor is not having savings, but having guaranteed future revenue generation – clients with signed contracts. As the author notes, the legal business entity and business infrastructure should be set up in advance. This enables one to acquire clients and do business before putting in a two-week notice at your full time job. I no longer operate my company, but had I abided by the 4 month of living expenses rule I would have never gotten off the ground. Within 4 months I was earning slightly more than double my previous salary. Don't shackle yourself to rigid startup rules. If you have clients and believe in what you're offering, go do it.
- sklogic 11y ago
  > 4 months of living expenses requirement can be quite excessive That's what banks want to see, for example, if you apply for a mortgage as a contractor.
- ownagefool 11y ago
  Generally a client can end your contract pretty much at any time without recourse. If you're client doesn't have mutability of obligation clause, that allows this irregardless of notice period, you probably fall under ir35. So this advice is based on that, but obviously if you're good and marketable, you'll probably be OK. I myself really became a contractor after a relationship breakup when I was in about over £3000 O/D, a mortgage to pay and about £4300 credit limit. Discussed this with agent, they agreed to pay me the day they were paid and I drove 400 miles for a contract which wasn't actually signed by the client yet. Luckily, they were happy to see me on the Monday, and I got paid at about £4200 into that limit. This was 2 years ago. Now I probably earn 5+ times my highest perm salary, so in my case the gamble was super worth it, but if you're not somewhat charismatic and decent at your job with a marketable skill, it could go the other way.
  - acaloiar 11y ago
    Agreed. To shed some more light on my strategy: * I planned to exit the company months in advance. * Signed two clients * I was a director of a small development team. I architected much of the company's critical infrastructure (most importantly, credit card/payment processing) and knew that I could leverage my knowledge to negotiate an advisory contract. * Put in my notice * Signed ex employer as my third client with weekly payment and a two month minimum. They obviously could have broken the minimum agreement, but kept me on until I severed the contract several months later. Weekly payment was key. A little strategy can go a long way, but obviously it could have turned out much differently for me. And as noted, this is purely anecdotal. While four months buffer is generally wise, it is not de facto necessary.
deleted 11y ago
[deleted]
jwmoz 11y ago
I moved from web dev perm jobs in the west mids, down to London and started contracting around 6 years ago. It's singlehandedly the best decision I ever made, tripling my salary. And bar a few of months after I went to Asia for a year (paid for by contracting), I've never had much trouble landing a new contract. You can easily earn over 100k if you're any good in your field. I was thinking about writing a post about the ins and outs of the London contract market.
steaminghacker 11y ago
Good info. Does anyone have info or experience in seting up your ltd company overseas together with an overseas bank account.
Damerell 11y ago
Can anybody rate the Headhunter family? They are aggressive and expensive. GB does'nt really suit as far as big companies are concerned because IBM experience is required which is lacking in GB Portfolios. Good luck to the Indians - I think they have got it right excluding German language.
logiclabs 11y ago
Despite me not generally being a fan of agencies, they do have there advantages. So long as they're reputable, one big advantage which not many people take into account is that a good one is giving you free invoice factoring and debt collection. This means you would normally get paid on-time even if the client hasn't paid the invoice yet. This is a pretty major thing for those starting out, particularly if you are touting for small clients, who may run into cash flow issues, or very large clients who mostly take forever to pay invoices. Chasing clients for money is, particularly when starting out, something that you feel hesitant to do in case you adversely affect your relationship with the client, as you don't think you have much leverage and are risking a good contract. It's a confidence thing though, these days I'd have no problem putting my foot down and walking away from a non-paying customer's contract. Of course, all you're really doing is moving the risk of non-payment on to the agency but, so far having worked with about 8 agencies, I've not had any trouble being paid on-time in 12 years. Working directly I've run into non-payment issues several times with non-payment periods upto almost a year (though I'd long moved on to another contract). But then I've got a friend who's been ripped-off by a recruitment agency, having folded with a couple of months pay due. So you do still need to chase them too and ensure you maintain an adequate pot of savings for breaks between contracts and covering non-payment issues. Having been in the position of working directly for clients and being owed large amounts of money for long periods of time, I'd recommend finding a reputable (sic) recruitment agent until you are up and running for a good few months or even a couple of years. That all said, you do have to put up with the barrage of appalling sales pitches for unsuitable positions and a lack of technical knowledge while dealing with most of them.
xedarius 11y ago
There are legal firms in the city who will review your contract for IR35 compliance. If you don't know what you're looking for I highly recommend using them. Do not be afraid of amending a contract and pushing back on the client. Being IR35 compliant is one of the biggest benefits of being a contractor(at least that was true before they changed the dividends rule), so it's important to get this right.
ExpiredLink 11y ago
>> You should have savings to cover at least 4 months of your usual expenses. 12, better 24 months for peace of mind. >> It may take several weeks to find your first contract. More likely, several months. It depends on the match between your skills and market demand. In general, most companies will not commission you directly. There's always a company between you and your end customer.
infinite8s 11y ago
Anybody have similar advice for the US?
FilterSweep 11y ago
Apologies for the ignorance.....As a barbaric American, Don't you still have to pay taxes if you are a US citizen unless you renounce it? Or does incorporation create a shelter (much like most US companies are doing)? Some relatives of mine took contracts in Canada and ended up having to pay triple taxes (two in Canada, one in USA)
- ska 11y ago
  As a US citizen you should be filing US taxes regardless; Whether or not you owe anything to the IRS depends on a lot of factors, talk to a specialist if you have anything complicated going on. Short story is you have a foreign income exclusion of about $100k. Incorporation wont shelter you from income, and as far as I can see most of the legal "sheltering" approaches don't really work unless you're talking quite a bit of money. To your other paragraph: your relatives shouldn't have paid any extra tax multiply. You can end up filing 4 forms, US federal, US state, Canadian federal, Canadian province, but there is a pretty comprehensive tax treaty so you end up paying in one place and claiming a credit in the other. Overall it's often nearly a wash, and whether or not you pay a bit more or less will depend on where your tax residency is and where your income is generated.
- Maultasche 11y ago
  Yes, that's true. Americans can be taxed for income earned outside the country. I'm not an expert on this subject, but I don't think that income earned by an incorporation would be taxed if it's incorporated outside the United States. However, the incorporation would have to pay its employee, and that employee's income would be subject to taxation if the employee is a US citizen. It's not quite as bad as it sounds though. The first $93000 of income earned abroad is not subject to taxation. Many countries (such as Canada and Germany) have reciprocal income tax treaties with the United States that keep citizens from being double-taxed. A US citizen in Germany, for example, wouldn't have to pay any US income tax on income earned in Germany as long as that income was subjected to German income taxes. Other income such as stock dividends and capital gains is another matter. I'm not entirely certain if that is double taxed or not. The IRS has a web page listing income tax treaties with various countries: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z http://www.irs.gov/Businesses/International-Businesses/Unite...
mavdi 11y ago
"Am I ready?" Are you a programmer? Yes? You are ready. Seriously in the current market you don't need to be a very confident programmer to be contractor in the UK. Quit your stressful jobs and get into contracting NOW. Money is 3x better. Hours are better, employers are more flexible with contractors believe it or not. And when shit hits fans, just bail and go find another contract.
- mtberatwork 11y ago
  Easier said than done and a bit short-sighted. I would argue that over the long run, the stress of having to track down and find new projects while maintaining a steady stream of income produces much higher stress levels than a 9-5 job. Some people can deal with that, others not so much. You will also have periods where you are flush with cash and periods where you may go months on end without income. Again, some people can handle this, others not so much. Are your hours really better when you factor in all of the business administration and marketing of yourself that you will need to do? Probably not. So, are you really ready? That's a much deeper question and not so easily answered.
hippich 11y ago
(my background is freelancing on sites like odesk.com and elance.com) Could someone explain what kind of contracting work is talked about here? With examples of products, type of work, technologies, etc? How much of it applicable to US?
hudo 11y ago
What's the situation in Dublin? From what i can see, just bunch of recruiters hiring for a few companies; any info which one is approachable directly? Im in .net
enjoy-your-stay 11y ago
Don't forget to setup a pension and pay into it regularly.
- medwezys 11y ago
  This is a good advice. Any links/advice where to start looking?
macavity23 11y ago
Excellent article. I was a contractor in the UK for ten years and this hits all the most important points. Thanks for posting. Once you have a 6m+ contract under your belt, look at recruiters again. As distasteful as they are (and they are), 90%+ of the most valuable contracts go through them. I would love for these parasitic fucks to be disintermediated, but if that was going to happen it would have happened by now, so live with it. Your problem with recruiters is that you are having 'friendly conversations' with them. This identifies you as a mark whom the recruiter can place into a £400/day contact and pay you £200. This happens ALL THE TIME and is the bread and butter of many recruiters. The thing to remember about recruiters is that they have no clue about the industry they're recruiting for. If they did, they would be working in it, not recruiting for it. So, the only real clue they have of how good you are is how good you SAY you are. So do not be friendly to recruiters - treat them was what they are - odious middlemen who need you. As you say, not signing anything with them is good. Another good strategy is to contemptuously dismiss the first contract a recruiter mentions. "This small-time crap? Sorry, I though you guys were top-drawer." Recruitment is HELLISHLY competitive and the churn is savage. Recruiters are sharks, and they think like sharks. But they NEED you. They will absolutely fight over you if they think you are worth fighting over. Don't bother until you have a contract under your belt. But once you have, start treating recruiters badly and see what happens. :)

232 points by timooo 11y ago

What does everyone do with the cash in their ltd company? My acct advises leaving the cash in the company but HMRC seem arsey about investing directly rather than moving it into an ISA which obviously then incurs an income tax hit.

astannard 11y ago
Generally you would start a Business Account, Barclays are good. You then pay yourself from your company but at a much lower rate than your company gets paid say an annual salary of £10,000. This will cause money to build up in your company account which you pay to yourself as dividends which are more tax efficient to get your money out. This is why most contractor use an accountant to manage the payroll etc

warrenmiller 11y ago

Crunch are aces.

astannard 11y ago
inniAccounts are good too but I am very biased as I work for them.
cjrp 11y ago
I've found their webapp to be pretty good, but trying to get actual financial advice was a struggle since you have to go through your account manager rather than talk directly to a real accountant.
- ownagefool 11y ago
  I use Maslins who provide freeagent. They respond emails within the hour usually.

junto 11y ago

Previous discussion: https://news.ycombinator.com/item?id=9726182 https://news.ycombinator.com/item?id=9726182

CharlesFinley 11y ago

The old discussion is now closed. You should be aware that there is no obligation for limited companies to have a business bank account. However, it is usually a good idea to have one. Furthermore, you don't need to be a UK resident to open a business bank account but most banks will not deal with you due to higher costs and fraud concerns. P.S. your company does not require a UK-based bank account. You can open a business bank account in your country in the name of your LTD company in the UK. You will need to have your company documents (Certificate of Incorporation and Memorandum & Articles of Association) apostilled.

batou 11y ago
Very true. Also the advice about marketing yourself is crap. Recruiters are the #1 way of landing contracts. They're finders and you're paying a finders fee for that service. They have the big guys with oodles of cash to get hold of. If you can't get a gig through a recruiter then you either don't have skills that are in demand or don't come across as someone who they'd want to sell. If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway. If you're sneaky about it, you and the recruiter can get the client to pay the finder's fee. Once you're in the system, build up a network of contacts and then move through that rather than using the recruiters. I'm doing that at the moment and ended up taking a perm position that was better paid than the contract rates were (without all the hassle of IR35, rolling a Ltd etc)
- jacquesm 11y ago
  > If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway. I've never used a recruiter, the companies I work for paid pretty good and I had one unpaid bill in a couple of decades. Building your own network and getting rid of recruiters as your main source of income is very important to new contract programmers. For one they take a cut and for another they will sell those parties where they can take the largest cut first. I'm not saying they don't have a function but recruiters goals and the recruited goals are not 100% aligned and you should be very much aware of that when using one. One way to side-step recruiters is to build up (large) number of contacts with people in the industry who may get to know someone that needs your particular skillset. The more peculiar your skills the harder it will be for recruiters to place you and so more of the acquisition part will have to be done by yourself. Think of using recruiters as 'outsourcing acquisition', it has all the upsides and the downsides associated with all other forms of outsourcing. Another danger with outsourcing your acquisition to recruiters is that you are handing the keys to one of the most important parts of your business to another party, who can then either cut you off at will, replace you and retain their contact with the company you were placed in and so on. The sales department (which you've essentially outsourced) is a very important (if not the most important) element in any company, even a small one. You may be able to make your life a little easier by not doing that work, especially if you're an introvert but in the longer term you're setting yourself up in a very dangerous position. So, use recruiters if you have to but be wary and make sure you have alternative channels to being hired under your own control. Never let a single recruiter get you all of your jobs or even a majority of your jobs.

gedrap 11y ago

Pretty good and brief summary about UK specific details, thanks for sharing :)

jackgavigan 11y ago

The previous discussion - https://news.ycombinator.com/item?id=9726182 https://news.ycombinator.com/item?id=9726182 - should be read alongside this page. It had a number of glaring errors, including some very bad advice about tax.

peteretep 11y ago

> You should have savings to cover at least 4 months of > your usual expenses. You will spend some money > establishing a company. It may take several weeks to > find your first contract. If you wanted to be extra safe, sure. I made the switch when I was heavily in debt, and it helped me get out of debt, so YMMV. > A service like www.formationsfactory.co.uk will make the > incorporation process easy. Actually it's super easy online using the UK government sites now. I set up a company (again) about ~14 months ago, and it took about an hour of filling in .gov.uk forms online. I would recommend just doing it yourself. Setting up a bank account is pretty easy too, and I'm not sure why you'd use a third party for it. 15 minutes of filling out HSBC forms did it for me. > Finding your first client might be hard. Sure. Most permanent jobs have a 4 week notice period, and you can find contractor roles happy for you to start in 4 weeks. Line one up before you quit, and there's no 2-3 week mad rushing around trying to find a contract. If you're just getting in to it, start with a recruiter. They'll eat in to your contract rate, for sure, but they'll also have a far better visibility of the market than you, they'll get better feedback from clients than you, and they'll help chase your invoices and so on. I worked as a contractor for a long time and never had a bad experience with a recruiter, where the OP seems to have had a dreadful time... > rates Go look on jobsite. For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing. > IR35 In addition to IR35, they're about to massively change how dividend tax works. You might be better off looking at an umbrella company like Giant, who'll save you a lot of accounting hassles...

dspillett 11y ago
> Most permanent jobs have a 4 week notice period Really? In experienced level dev jobs? Most of the people I know are on two months notice. Three months, which is what I'm tied to, doesn't seem uncommon for senior devs/DBAs/similar.
- peteretep 11y ago
  That's been my experience when hiring people. I only hired one person with a 12 week notice, everyone else was 4 weeks. YMMV, I guess.

Dakuan 11y ago

Worth pointing out that that tax regulations are changing and contracting could become a lot less lucrative from April 2016. Best jump in now before its too late!

colinramsay 11y ago

This is the easy bit. Finding quality, well paid work, that's the hard bit. It renders all the rest of it a bit irrelevant.

peteretep 11y ago
My experience (and that of many coworkers I've had) - unless you've really pissed in the pool, there is an unending supply of good contracts in London.
- colinramsay 11y ago
  Perhaps true but: - Are any remote? I mean who wants to live in London? ;) - How do you find them in the first place?
  - peteretep 11y ago
    > - Are any remote? I mean who wants to live in London? ;) Generally not. One of my current clients allows their normal contractors to do 50% working from home. > - How do you find them in the first place? Recruiters and IRC
- squinn2 11y ago
  Anyone know what the market's like for embedded s/w development these days? ~ 15 years ago (ouch) recall we were using a lot of contractors for protracted periods & had to keep them sweet for fear they might just skip off to another job. Didn't make the transition then. Always wondered ..
  - pyb 11y ago
    Embedded contracting in the UK is dead atm. I found that in the field, most contract vacancies from agents are fake. As for the few hw startups, they're mostly unfunded.

yetanotheracc 11y ago

What are the benefits of incorporating an Ltd vs being a sole trader?

peteretep 11y ago
There are significant tax savings, and theoretically limited liability. The significant tax savings will change next tax year with changes in dividend taxes and NIC contributions. No-one is really sure of the actual impact at this point.
- nikon 11y ago
  7.5% on your dividends. About 3k a year for a 100k earner... Nothing to go permie about.
  - peteretep 11y ago
    I had thought the jury was still out on this - I do hope it ends up being only that amount though.
    - logiclabs 11y ago
      The rates for dividend payments are set but because of the triple changes of the budget - dividends, employment allowance and travel/subsistence expenses, it could affect some contractors a lot worse than others. Though it's mostly those who rack up large commuting/accommodation expenses chasing high paid work in London while not living anywhere near there. The travel/subsistence rules haven't been set yet but it's likely HMRC will crack down on them quite hard.
- benashford 11y ago
  There's a calculator here: http://www.hl.co.uk/news/articles/budget-2015-changes-to-dividend-tax-explained http://www.hl.co.uk/news/articles/budget-2015-changes-to-div...
mostlystatic 11y ago

andy_ppp 11y ago

One important thing to note is that your accountant gets a kickback from setting up a bank account. You should instead aim to search for the best bank account you can find with the best deal and the faster payments service; my bank account with Cater Allen still does not support this for example. I'd also highly highly recommend freeagent which is so good it makes you wonder what your accountant does. It has been right where my accountant has often been wrong!! Here's a referral link: http://fre.ag/34atijdc http://fre.ag/34atijdc

tome 11y ago
Freeagent looks interesting. What's their customer support like? My accountant is about 90 GBP per month but I get extremely prompt responses from them on technical issues so I'm inclined to think they're worth it.
- andy_ppp 11y ago
  Freeagent have always responded pretty immediately but it's best to get an accountant [1] that supports Freeagent and you are then effectively paying for support. They use Get Satisfaction which is community and vendor run support [2]. It makes the accountants life a lot easier too (they get a slightly restricted login). [1] http://www.freeagent.com/find-an-accountant http://www.freeagent.com/find-an-accountant [2] http://community.freeagent.com/freeagent http://community.freeagent.com/freeagent
- peteretep 11y ago
  My accountant is the same, and gives me a discounted version of FreeAgent. These days I have considerably more complicated needs than I used to doing simply contracting, but I'd probably still use FA + the accountant anyway. I pair it with ReceiptBank, with which there is an acceptable (but not great) integration.

yetanotheracc 11y ago

Compared to full-time positions of equivalent scope, what skill level and experience is needed to work as a contractor? How do the working conditions differ?

gadders 11y ago
My experience is specific to banking, but interms of working conditions they are more or less identical, apart from the odd "contractor furlough" when contractors are forced to take unpaid leave (normally around the Christmas perioid).
brc 11y ago
In my experience, sometimes they wanted more skill and experience for a permanent role than they did for a contractor. I worked as a contractor and had to fill headcount, and the process was different for a contractor and a permanent. Contractors are much simpler to get rid of if they don't turn out, so hiring decisions were made faster. Permanent people being hired had to be of a higher standard. This doesn't mean that you can get away with being a junior in a senior role, but it might mean there is more of a focus on technical skills rather than university qualifications, that type of thing. There are some crap contractors floating about the system and some crap permanent employees. And vice versa. The working conditions are almost identical, except that in a downturn the contractors will be first out the door. They also get to avoid 'company building' meetings and crap like that.

jacquesm 11y ago

I wrote a whole series of pages on this subject condensing the last 30 years or so: http://jacquesmattheij.com/be-consultant/ http://jacquesmattheij.com/be-consultant/ The idea was to one day bind this all together and make it a book.

peteretep 11y ago
Contracting in a UK sense is really very different from consulting or freelancing. It's essentially just a 9-5 short-term job, usually on-site, with more money and some extra accountancy perks.
- jacquesm 11y ago
  I see more things in common than differences between those and I know people in the UK that use contract work to supplement their income when their consulting/freelancing gigs are not plentiful enough.

ravibhatt 11y ago

Adding my two cents. I have been a contractor for almost 3 years now. My personal opinion: - Contracting pays a lot more than a perm role. - You do not deal with politics, which is a major plus for me. - You do not hear about you not getting your promised y% bonus because company did not do x% business. - You are not worried about 'changing the world', the way you would in a startup. - working 4-6 years your asses off at a startup may be equivalent to working as a contractor for that time. That is a big may be, your skills, confidence, market everything plays a big role. - Always get a good accountant, go for ltd company, enroll your wife and PAY YOUR TAXES! - I started when i had about a month's savings, and it worked out well. - Day rates depend on your skill set. 350 is the minimum i guess for any role, max is your imagination! 800? 1000? but getting 500-550 should be the target at least. - Getting a contract is tricky: use linkedin, recruiters, friends and whatever else. All are necessary. I would not worry too much about a recruiter getting a cut as long as i get what i had asked for. - Get a contract before quitting your perm role. Mostly companies looking for a contractor wait for 2 weeks, if you are good and your skills are in demand they would wait for 3-4 weeks. - Always plan your vacation at times when everyone else is on holiday. December/January and April are good times. - HMRC website is good enough to register a company, 15 pounds and 20-30 mins. - Getting 450 a day is always better than siting idle waiting for that 550-600 a day contract. - There is lot of competition, be prepared for that. - Prepared for some level of stress (specially when you are out of work), it is still worth it. - Do not worry too much about your utilization in a contract, it is the client's worry. You are paid for your skills and not your time. Do put reasonable time, but that is not the criteria you were hired with. - 'Doing/Completing my time' is a BS. I have had several contracts and none of the clients ever had problems with my timings. And i am particularly bad at working normal hours. Sometimes i get at work at 10 and leave at 5. At times i work whole nights. - Recruiters are lairs, don't give too much info. Ask for a job spec and day rate before giving any info. I would help you, after you get me a contract! - Send your CV to all who asks for it. Keeps you in the market. - You will not necessarily get a higher day rate if you went directly with a client. Your day rate depends on your skills and negotiating skills only. If you do not ask for a good day rate, chances are, you wont get it. - Sometimes, leave it on Luck. We can be the smartest asses on the planet, but at times need luck. Hope this helps.

11y ago

nikon 11y ago

I think regardless of the tax benefits discussed in this thread, even with an equal playing field you will earn significantly more than your permie peers. You can get 50k if you're lucky in London, but you can earn 500 a day as a contractor. 500 * 230 conservative work days per year = 115,000 NET

eterm 11y ago
230 work days aren't "conservative", that's 4.5 days/week. Given the legal minimum of 28 days holiday per year for permanent employees (28 includes bank holidays, often you'll find vacation quoted as 20 days which doesn't include the bank holidays), that's close to 100% "found work" rate.
- scalesolved 11y ago
  Ten weeks holiday and still earning over 100k contracting a year at £500 a day. Obviously not everyone has a contract all the time but from my friends that do contract they almost always are working (and they are outside the market hungry center that is London)
  - jakub_g 11y ago
    Speaking about holidays, what's the employers' attitude towards days off say on a 3 or 6 months contract? Can you take a week or two off during a 3 month contract or you are generally expected to work the full contract time?
    - medwezys 11y ago
      Clients can't prevent you from taking time off, you have a complete freedom to choose how much you work in theory. Having said that taking a week or more off during a 3 month contract will no be expected by most of the clients. Taking a day or two off is usually not a problem. It really depends on the client.
    - gaius 11y ago
      You can take as much holiday as you want, between contracts. I know a few who regularly head off for 1-3 months at a time, between working.

jheriko 11y ago

wasn't this here only a few days ago already? fwiw i've jumped into this sort of work before without any savings or backup plans... it was much more 'exciting'. XD

codeshaman 11y ago

Great article, very thoughtful. But my biggest question is where do you find a client ? Is there a website (like a jobs website) for contract work, besides elance and the like ? Yeah, I can google it, but it's usually just a waste of time. Is there any serious place where an experienced developer can meet serious clients ? I mean clients willing to pay for quality work so I can make a living similar to a corporate job ?

iyra72 11y ago
As a very young programmer looking to make some money along his studies in the UK, I want to know where I can find clients, or even start a portfolio that's more than a few open source projects on GitHub.
- ceeK 11y ago
  I posted an offer to HN to build their app for £100. Monetary value is obviously very little, but it's a token gesture that technically gives you freelance experience. It was great to build my portfolio up; I'd recommend it if possible. It's much easier to land gigs with a freelance portfolio. https://news.ycombinator.com/item?id=6382405 https://news.ycombinator.com/item?id=6382405
- mtberatwork 11y ago
  I would have a look around for developer job postings at your university instead of trying to track down and maintain commercial contracts.
sklogic 11y ago
I do not know anyone who started as a contractor. Everyone I know (myself included) moved to contracting after maturing for several years in the industry, building up a reputation and a network of contacts.
- ownagefool 11y ago
  There are such a thing as junior contractors, they tend not to get amazing rates, but they'll still be doing a lot better than what they would on 13k a year, and they can quickly negotiate better rates. I was perm for like 5-6 years, I think building your skills in perm roles is how it should be, but I'd probably have a lot more money if I'd just became a contractor.

hanoz 11y ago

Contrary to the advice, you do not need an accountant, especially if you are able to ignore another part of the advice and not register for VAT (if your turnover is below the registration threshold of £82,000) which simplifies the accounting greatly. Your duties are then mainly as follows: Use HMRC PAYE Tools to report each salary payment you make, and pay any National Insurance if applicable (which it won't be if you keep you salary below £671 a month). Use the same tool to report any expense payments each May (form P11D). Use Companies House WebFiling to submit your annual return (a short submission confirming some details about your company's directors and shareholdings etc.) each company year end. Use HRMC's Online services to submit your corporation tax and accounts nine months after each year end. I pay £45 each year for collection of Excel templates from http://www.diyaccounting.co.uk/ http://www.diyaccounting.co.uk/ to record my accounts which produces a mockup of the HMRC web form with the fields filled in. Pay yourself a dividend one or twice a year and find a Word template to print out a record of the payment and the board meeting you had to decide on it. Finally, use HMRC Online Self Assessment to submit your personal tax return each January, which you may already be doing anyway. Looking at all this now it seems like a lot, but it's not as bad it sounds. I suppose you've got to have something of an interest in learning how a business is run to justify it. On the other hand you can save your company a tidy sum, plus as a company director you're legally responsible for the accuracy of the various submissions anyway, whether an accountant does it all for you or not, so you may as well have a sound understanding of it all I say. Also, I don't know whether this is the really the case or not but I've a theory that the more you run your operation like a proper business the less likely you're going to come a cropper of an IR45 disguised employment judgement, which could be severely financially damaging. Running your own operation like this will put you in a better position for trying out any side projects I believe, and of course it will all stand you in good stead when you finally hit on the world changing idea you've been waiting for and your one man band blossoms into a large corporation (although do then get some accountants - but at least you'll have some idea what they're up to).

SmellyGeekBoy 11y ago
Absolutely solid advice here. This is exactly what I do as a one man band.
11y ago

borplk 11y ago

Is there an Australian version of this somewhere? I wish people would replicate this for as many countries as possible.

JacobAldridge 11y ago
The IR35 related laws in the UK make independent contracting much easier and therefore more common there than in Australia. As I understand it, many UK contractors would be considered employees under Australian law. Having run my business in Australia and then the UK, I asked the founder of Crunch in the UK (Accounting support for contractors) if he planned to expand to Australia because I loved their service. While open to it at some point, iirc he said there just wasn't the volume of potential clients down under to justify the legislation and recruitment investment.

acaloiar 11y ago

As others have noted, the 4 months of living expenses requirement can be quite excessive. I've seen similar advice in the past and can't help but recall my personal anecdote of starting a company with barely enough money for one month of expenses. What is far more vital to one's success as a solo contractor is not having savings, but having guaranteed future revenue generation – clients with signed contracts. As the author notes, the legal business entity and business infrastructure should be set up in advance. This enables one to acquire clients and do business before putting in a two-week notice at your full time job. I no longer operate my company, but had I abided by the 4 month of living expenses rule I would have never gotten off the ground. Within 4 months I was earning slightly more than double my previous salary. Don't shackle yourself to rigid startup rules. If you have clients and believe in what you're offering, go do it.

sklogic 11y ago
> 4 months of living expenses requirement can be quite excessive That's what banks want to see, for example, if you apply for a mortgage as a contractor.
ownagefool 11y ago
Generally a client can end your contract pretty much at any time without recourse. If you're client doesn't have mutability of obligation clause, that allows this irregardless of notice period, you probably fall under ir35. So this advice is based on that, but obviously if you're good and marketable, you'll probably be OK. I myself really became a contractor after a relationship breakup when I was in about over £3000 O/D, a mortgage to pay and about £4300 credit limit. Discussed this with agent, they agreed to pay me the day they were paid and I drove 400 miles for a contract which wasn't actually signed by the client yet. Luckily, they were happy to see me on the Monday, and I got paid at about £4200 into that limit. This was 2 years ago. Now I probably earn 5+ times my highest perm salary, so in my case the gamble was super worth it, but if you're not somewhat charismatic and decent at your job with a marketable skill, it could go the other way.
- acaloiar 11y ago
  Agreed. To shed some more light on my strategy: * I planned to exit the company months in advance. * Signed two clients * I was a director of a small development team. I architected much of the company's critical infrastructure (most importantly, credit card/payment processing) and knew that I could leverage my knowledge to negotiate an advisory contract. * Put in my notice * Signed ex employer as my third client with weekly payment and a two month minimum. They obviously could have broken the minimum agreement, but kept me on until I severed the contract several months later. Weekly payment was key. A little strategy can go a long way, but obviously it could have turned out much differently for me. And as noted, this is purely anecdotal. While four months buffer is generally wise, it is not de facto necessary.

deleted 11y ago

[deleted]

jwmoz 11y ago

I moved from web dev perm jobs in the west mids, down to London and started contracting around 6 years ago. It's singlehandedly the best decision I ever made, tripling my salary. And bar a few of months after I went to Asia for a year (paid for by contracting), I've never had much trouble landing a new contract. You can easily earn over 100k if you're any good in your field. I was thinking about writing a post about the ins and outs of the London contract market.

steaminghacker 11y ago

Good info. Does anyone have info or experience in seting up your ltd company overseas together with an overseas bank account.

Damerell 11y ago

Can anybody rate the Headhunter family? They are aggressive and expensive. GB does'nt really suit as far as big companies are concerned because IBM experience is required which is lacking in GB Portfolios. Good luck to the Indians - I think they have got it right excluding German language.

logiclabs 11y ago

Despite me not generally being a fan of agencies, they do have there advantages. So long as they're reputable, one big advantage which not many people take into account is that a good one is giving you free invoice factoring and debt collection. This means you would normally get paid on-time even if the client hasn't paid the invoice yet. This is a pretty major thing for those starting out, particularly if you are touting for small clients, who may run into cash flow issues, or very large clients who mostly take forever to pay invoices. Chasing clients for money is, particularly when starting out, something that you feel hesitant to do in case you adversely affect your relationship with the client, as you don't think you have much leverage and are risking a good contract. It's a confidence thing though, these days I'd have no problem putting my foot down and walking away from a non-paying customer's contract. Of course, all you're really doing is moving the risk of non-payment on to the agency but, so far having worked with about 8 agencies, I've not had any trouble being paid on-time in 12 years. Working directly I've run into non-payment issues several times with non-payment periods upto almost a year (though I'd long moved on to another contract). But then I've got a friend who's been ripped-off by a recruitment agency, having folded with a couple of months pay due. So you do still need to chase them too and ensure you maintain an adequate pot of savings for breaks between contracts and covering non-payment issues. Having been in the position of working directly for clients and being owed large amounts of money for long periods of time, I'd recommend finding a reputable (sic) recruitment agent until you are up and running for a good few months or even a couple of years. That all said, you do have to put up with the barrage of appalling sales pitches for unsuitable positions and a lack of technical knowledge while dealing with most of them.

xedarius 11y ago

There are legal firms in the city who will review your contract for IR35 compliance. If you don't know what you're looking for I highly recommend using them. Do not be afraid of amending a contract and pushing back on the client. Being IR35 compliant is one of the biggest benefits of being a contractor(at least that was true before they changed the dividends rule), so it's important to get this right.

ExpiredLink 11y ago

>> You should have savings to cover at least 4 months of your usual expenses. 12, better 24 months for peace of mind. >> It may take several weeks to find your first contract. More likely, several months. It depends on the match between your skills and market demand. In general, most companies will not commission you directly. There's always a company between you and your end customer.

infinite8s 11y ago

Anybody have similar advice for the US?

FilterSweep 11y ago

Apologies for the ignorance.....As a barbaric American, Don't you still have to pay taxes if you are a US citizen unless you renounce it? Or does incorporation create a shelter (much like most US companies are doing)? Some relatives of mine took contracts in Canada and ended up having to pay triple taxes (two in Canada, one in USA)

ska 11y ago
As a US citizen you should be filing US taxes regardless; Whether or not you owe anything to the IRS depends on a lot of factors, talk to a specialist if you have anything complicated going on. Short story is you have a foreign income exclusion of about $100k. Incorporation wont shelter you from income, and as far as I can see most of the legal "sheltering" approaches don't really work unless you're talking quite a bit of money. To your other paragraph: your relatives shouldn't have paid any extra tax multiply. You can end up filing 4 forms, US federal, US state, Canadian federal, Canadian province, but there is a pretty comprehensive tax treaty so you end up paying in one place and claiming a credit in the other. Overall it's often nearly a wash, and whether or not you pay a bit more or less will depend on where your tax residency is and where your income is generated.
Maultasche 11y ago
Yes, that's true. Americans can be taxed for income earned outside the country. I'm not an expert on this subject, but I don't think that income earned by an incorporation would be taxed if it's incorporated outside the United States. However, the incorporation would have to pay its employee, and that employee's income would be subject to taxation if the employee is a US citizen. It's not quite as bad as it sounds though. The first $93000 of income earned abroad is not subject to taxation. Many countries (such as Canada and Germany) have reciprocal income tax treaties with the United States that keep citizens from being double-taxed. A US citizen in Germany, for example, wouldn't have to pay any US income tax on income earned in Germany as long as that income was subjected to German income taxes. Other income such as stock dividends and capital gains is another matter. I'm not entirely certain if that is double taxed or not. The IRS has a web page listing income tax treaties with various countries: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z http://www.irs.gov/Businesses/International-Businesses/Unite...

mavdi 11y ago

"Am I ready?" Are you a programmer? Yes? You are ready. Seriously in the current market you don't need to be a very confident programmer to be contractor in the UK. Quit your stressful jobs and get into contracting NOW. Money is 3x better. Hours are better, employers are more flexible with contractors believe it or not. And when shit hits fans, just bail and go find another contract.

mtberatwork 11y ago
Easier said than done and a bit short-sighted. I would argue that over the long run, the stress of having to track down and find new projects while maintaining a steady stream of income produces much higher stress levels than a 9-5 job. Some people can deal with that, others not so much. You will also have periods where you are flush with cash and periods where you may go months on end without income. Again, some people can handle this, others not so much. Are your hours really better when you factor in all of the business administration and marketing of yourself that you will need to do? Probably not. So, are you really ready? That's a much deeper question and not so easily answered.

hippich 11y ago

(my background is freelancing on sites like odesk.com and elance.com) Could someone explain what kind of contracting work is talked about here? With examples of products, type of work, technologies, etc? How much of it applicable to US?

hudo 11y ago

What's the situation in Dublin? From what i can see, just bunch of recruiters hiring for a few companies; any info which one is approachable directly? Im in .net

enjoy-your-stay 11y ago

Don't forget to setup a pension and pay into it regularly.

medwezys 11y ago
This is a good advice. Any links/advice where to start looking?

macavity23 11y ago

Excellent article. I was a contractor in the UK for ten years and this hits all the most important points. Thanks for posting. Once you have a 6m+ contract under your belt, look at recruiters again. As distasteful as they are (and they are), 90%+ of the most valuable contracts go through them. I would love for these parasitic fucks to be disintermediated, but if that was going to happen it would have happened by now, so live with it. Your problem with recruiters is that you are having 'friendly conversations' with them. This identifies you as a mark whom the recruiter can place into a £400/day contact and pay you £200. This happens ALL THE TIME and is the bread and butter of many recruiters. The thing to remember about recruiters is that they have no clue about the industry they're recruiting for. If they did, they would be working in it, not recruiting for it. So, the only real clue they have of how good you are is how good you SAY you are. So do not be friendly to recruiters - treat them was what they are - odious middlemen who need you. As you say, not signing anything with them is good. Another good strategy is to contemptuously dismiss the first contract a recruiter mentions. "This small-time crap? Sorry, I though you guys were top-drawer." Recruitment is HELLISHLY competitive and the churn is savage. Recruiters are sharks, and they think like sharks. But they NEED you. They will absolutely fight over you if they think you are worth fighting over. Don't bother until you have a contract under your belt. But once you have, start treating recruiters badly and see what happens. :)