going from employer to contractor

I work in IT, and my company offers no pension, or other useful benifits. my current notice period is 1 month (for both them and me)

I'm thinking of asking at my next review to be taken on as a contractor instead of a wage rise, as then could look after my own tax in an umbrella company.

There are also a couple of other benifits to my company, so they may go for it.

Is this a wise move ?

how does this affct a mortgage application, given that my monthly earning remain the same

Thanks to all Simon

Reply to
simonsmith.uk
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Just make sure you find out all about IR35 first, as it sounds like this will probably apply to you.

Adam

Reply to
Adam

IMHO no, As a contractor you need to see more in your hand than simply cashing out a salary.

Being a contractor will lose you access to some benefits if the job should end for reasons outside of your control.

Just saying that your take home will be the same is not enough, it needs to be more, by quite a considerable margin, for the move to be worthwhile.

Historically they will want to see previous accounts which you wont have, but I think in the current era of self cert mortgages I doubt that it will make a difference.

tim

Reply to
tim (back at home)

Cheers Adam for the quick response ...

I susppect it will , anyone know a good online ref for ir35 for the (tax) layman? Can anyone explain it in terms a nerd couldunderstand ??

Reply to
simonsmith.uk

Cheers Adam for the quick response ...

I susppect it will , anyone know a good online ref for ir35 for the (tax) layman? Can anyone explain it in terms a nerd could understand ??

Reply to
simonsmith.uk

Briefly.... because your relationship with your client will be virtually the same as any other employee (except you'll no longer have a range of employment protection etc rights), you'll be taxed like an employee - notwithstanding you have set up a Ltd Company.

The chief impact is that you will have to pay employER's NI yourself (as well as employEE's) - so you need a roughly 11% uplift on your current pay (exact figure depends on your earnings level and it changes slightly each year). Your employer may agree this increase - because they will no longer be paying this themselves.

You also need to allow for costs of setting up the Ltd Coy, annual fees for accountancy / company secretarial (inc. Company House compliance), bank charges (after possible initial "free banking" period). If your t/o is above the VAT threshold, you also need to register for VAT, charge your client VAT, and submit VAT returns each quarter.

Your total tax bill (income tax & Corp Tax) will probably be slightly less than you now pay - but overall you're unlikely to be better off.

A new mortgage should still be available, but probably only on a "self-assessed" basis - so you may not get such a good interest rate. Others here should know more about this aspect.

Above all, tread carefully with "umbrella companies".

You'll find more info on HMRC website - also contractors groups etc.

Reply to
Martin

Being a self confessed "nerd" you will understand IR35 better than most others. Your best bet is to read info on HMRC. You will also find lots of usefull info on various accountants websites. Do a google search on the subject.

Adrian

Reply to
Adrian Smith

are there big problems with umbrella companies

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also what if the terms of employment chaged (I'm currently on 1 months notice , a 3 month contract would change this ) ..... thanks to all for the advice btw

Reply to
simonsmith.uk

FWIW, I have my own limited company (albeit a 'real' one, and not something that gets caught by IR35), and I have just applied for a mortgage. The lender wanted to see my last 3 years of accounts, and calculated my salary as my average earnings over 3 years. I got exactly the same interest rate as anyone else would have done. That said, I have a long relationship and a good credit rating with the lender.

I don't know whether all that's standard practice, though.

Adam

Reply to
Adam

You would loose sick pay and your holidays if you did this. I would certainly not consider contracting for the same wage, the company would save a fortune.

You would miss out on rights to redundancy pay among other things.

Reply to
Zoe Brown

Not so once you have 3 years accounts, I have access to any mortgage rate that an employee does. There are brokers who specifically deal with contractors, check the ads on the shout99 site and other contractors sites, I have used Craig at Graduate and Professional (

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) for many years.

Reply to
peter

Yes, go here:

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You may need to register, but this is a trustworthy company.

Reply to
peter

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