Software developer contractor

jonneymendoza

jonneymendoza

jonneymendoza

Caporegime
Joined
7 Apr 2008
Posts
25,570
Location
Lorville - Hurston
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
 
Depends on how easy you want it. You can sign up with an accountant and they take care of it all for you, even by putting you through to the relevant people on the phone and its part of he package you pay them for. The incorporation of the company will cost you though, think it cost me £35, I can't remember now. Or you can do it all yourself.

Make sure you fully understand IR35 and work accordingly.
 
When I started contracting I did it all the easy way. Got an accountant first and then got them to do everything else for me - all I had to do was sign the forms in the right place.
I think it cost about £250 from memory, but if you want the least hassle it's good.

As far as contracting itself goes I've been doing it for a bit over four years now and it's the best career decision I've made.
 
Things to be aware of and to save or make provision (budget) for:

- Sick pay
- Pension
- Being out of work (demand changes, and you could find yourself without a contract for extended periods of time)
- Training and keeping yourself up to date
- Mortgage (if you don't already have one, there's just a few more hoops to go through if you are on a low income - no biggie, just something to be aware of)
- IR35, you need to be careful that whoever you end up contracting for (either directly or via an umbrella) don't make it hard or difficult for you to step outside IR35, so watch for things like benefits which apply to everyone, like a free/subsidised lunch, free gym, that sort of thing.

Consider using a specialist company such as Crunch (http://www.crunch.co.uk/) who I have had recommended to me, but not used myself (as I'm still a dirty permie).

Good luck!

:)
 
jonneymendoza, let us know how you get on.

I've been a software developer for over 5 years now and have been considering contracting for a long time now.

If you stumble upon any gotchas or issues, let us know :)

thanks
 
I have been a freelance web developer for ~3 years. I have quadrupaled my salary in that period of time.

The golden rule is: get yourself a good accountant. Don't be afraid to spend £1200 a year on one. They'll save you more than they cost.

I would also strongly recommend using Free Agent. A lot of accountants will offer this as part of their package.

Earning £350-£500 per day is easily doable and frankly I wouldnt even get out of bed for less these days.

Everything else you have mentioned is true. Setup a limited company, pay yourself a salary of ~£620 per month and take the rest as dividends. Expense any purchases such as laptops, computers, mobiles etc. You can also get away with travel and lunch as well.

For all those saying it is tax avoidance - I pay way more tax being a contractor (corporation tax, VAT etc) than I ever would being a perm

Mr^B said:
Consider using a specialist company such as Crunch (http://www.crunch.co.uk/) who I have had recommended to me, but not used myself (as I'm still a dirty permie).
Click to expand...

oh, and do not use Crunch
 
Mr^B said:
Things to be aware of and to save or make provision (budget) for:

- Sick pay
- Pension
- Being out of work (demand changes, and you could find yourself without a contract for extended periods of time)
- Training and keeping yourself up to date
- Mortgage (if you don't already have one, there's just a few more hoops to go through if you are on a low income - no biggie, just something to be aware of)
- IR35, you need to be careful that whoever you end up contracting for (either directly or via an umbrella) don't make it hard or difficult for you to step outside IR35, so watch for things like benefits which apply to everyone, like a free/subsidised lunch, free gym, that sort of thing.

Consider using a specialist company such as Crunch (http://www.crunch.co.uk/) who I have had recommended to me, but not used myself (as I'm still a dirty permie).

Good luck!

:)
Click to expand...

u can be sick for half a year and still earn more then a perm :)

i dont believe in pensions. i will manifest my own way of dealing with this in the future.

I am a versatile programmer, prepared to learn the next best thing. if Android dies tomorrow and windows 8 becomes the next big thing i will simply hit the books and start reading and start developing and learning and before u know it, back to earning 400-500 a day developing this time for windows 8, rinse repeat. only way my line of work will be affected is if the software industry collapses all together! Then i will just learn a new trade lol.

agent_paul said:
jonneymendoza, let us know how you get on.

I've been a software developer for over 5 years now and have been considering contracting for a long time now.

If you stumble upon any gotchas or issues, let us know :)

thanks
Click to expand...

Will do and i think now is the time for u to do it yourself. i have been in the game for 5 years also. nearly 6 actually.

redeye_uk said:
I have been a freelance web developer for ~3 years. I have quadrupaled my salary in that period of time.

The golden rule is: get yourself a good accountant. Don't be afraid to spend £1200 a year on one. They'll save you more than they cost.

I would also strongly recommend using Free Agent. A lot of accountants will offer this as part of their package.

Earning £350-£500 per day is easily doable and frankly I wouldnt even get out of bed for less these days.

Everything else you have mentioned is true. Setup a limited company, pay yourself a salary of ~£620 per month and take the rest as dividends. Expense any purchases such as laptops, computers, mobiles etc. You can also get away with travel and lunch as well.

For all those saying it is tax avoidance - I pay way more tax being a contractor (corporation tax, VAT etc) than I ever would being a perm



oh, and do not use Crunch
Click to expand...

i may use the same accountant my friend is using thanks.

what is the current Threshold for dividends that are tax free per year?
 
i am thinking of handing in my notice now actually to start the ball rolling.

going for a nice long month holiday bnetwen feb and march and want to start a contract once i get back
 
Myth: An Umbrella Company or Composite Company can pay me a minimum salary and dividends, which will earn me more money.

Fact: Being paid salary and dividends would be more financially beneficial to you, however you can only legally be paid in this way if your contract is IR35 friendly (outside IR35) and you are receiving payment through your own personal Limited Company, over which you have complete financial and administrative control. From 6th April 2007 any involvement from a third party in running a Limited Company (other than accountancy services) would place you under the scope of a Managed Service Company (MSC) If you receive your payments via a third party or your contract fails IR35 (inside IR35) and you are running your own Limited Company, you can only be paid through PAYE.
Click to expand...

So what is the point in umbrella companies, then?

http://www.contractorumbrella.com/umbrella_companies.html?ref=MFCalc
 
jonneymendoza said:
what is the current Threshold for dividends that are tax free per year?
Click to expand...

It is the transition to higher rate tax plus your tax free allowance which adds up to around £43k.

Something missed and is worth considering is to think about registering for the flat rate scheme for VAT which gives you a portion of the VAT that you charge the client.
 
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Amleto said:
So what is the point in umbrella companies, then?

http://www.contractorumbrella.com/umbrella_companies.html?ref=MFCalc
Click to expand...

An umbrella company is generally run by an accounting firm so you are technically employed by them. As such, the client pays your agency, who then pays your accounting firm who takes all the necessary tax off and give you the rest.

Under this method, it is not possible to be captured by IR35. IR35 only comes into play when you pay yourself via dividends via a ltd company and you have financial control of that company. With an umbrella company you don't have that control as you are an employee of the accounting firm.
 
I've flirted with the idea of contracting as a project accountant, but the uncertainty is just too stressful when you have a mortgage and a young family.
 
Robbie G said:
I've flirted with the idea of contracting as a project accountant, but the uncertainty is just too stressful when you have a mortgage and a young family.
Click to expand...

There is certainly more risk associated with contracting but IMO, the risk is diminishing as permie roles these days are becoming less secure. I fell into contracting by chance as I was made redundant after 9 years service in my last job and after being 3 months unemployed, was offered a contracting role.

The key is to not get carried away with the extra cash you are earning and build up a decent war chest as quickly as possible, that way you can ride out any lean times should they occur. Personally I have built up enough to keep myself going for a year out of work (able to meet my commitments not live a life of luxury) so am at a point where the uncertainty isn't a problem any more.
 
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Robbie G said:
I've flirted with the idea of contracting as a project accountant, but the uncertainty is just too stressful when you have a mortgage and a young family.
Click to expand...

Like someone else said, perm roles are not that secure anymore. i got made redundant once already and nearly twice had i not left before they told us we was going to be made redundant..

Today you may feel safe in your nice perm role but tomorrow they could tell u your time is up without warning.

yea they can give u redundancy pay/notice that will last u a month or two but when you are a contractor u can practically take a year off with the amount of money u have saved.

And if u go contract, it doesnt mean u cant go back to being a perm later
 
Robbie G said:
I've flirted with the idea of contracting as a project accountant, but the uncertainty is just too stressful when you have a mortgage and a young family.
Click to expand...

This and the questions around whether ill be good enough for roles.

These are the only things that seem to be holding me in a perm.
 
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