New year, new contracting career!
Ever thought about branching out on your own and being your own boss? Well, thousands have and as the leading accountancy providers for limited company contractors, freelancers and interim managers, SJD Accountancy, who support over 13,000 clients, have found having your own Limited company has become more popular than ever with 2013 being one of its busiest years to date.
SJD Accountancy, who offer specialist fixed fee limited company accountancy services to contractors nationwide, has had a record breaking last 12 months.
With unlimited face to face meetings, telephone and email contact with your own dedicated accountant, SJD Accountancy has built an extensive client base by offering the best customer service available with expertise unrivalled within its sector, proudly holding more awards for accounting excellence and customer service than any other accountancy firm in their market*.
But why do so many make the move from permanent to contracting?
Flexibility – contractors can choose when and where they work. The flexibility of being your own boss means you can take as much or as little holiday as you like. In part one of SJD’s 2013 contractor attitude survey – where over 1,000 Limited company contractor clients voiced their views and opinions on the state of the current contractor market – over 72% stated contracting has had a positive effect on their work/life balance, a 20% year on year growth from 2012.
Skills Development – working as a contractor gives ample opportunity for contractors to develop and grow their skill set. As experience and network contacts grow within their sector, opportunities will increase with other contractors contacting you with regards to opportunities with their clients.
Financial benefits – an average contractor rate can easily be double that of a full time employee, or even more. With companies such as Manpower reporting daily rates of up to £1,000 – as stated in their Employment Outlook Survey for the first quarter of 2014 – it comes as no surprise why so many make the switch from permanent to contracting.
But not so many people make the decision to become a contractor as swiftly as some, which is why SJD Accountancy recently launched a dedicated Life as a Contractor Case Studies Hub, with real life examples and case studies from existing clients who have decided to make the move into contracting. This case studies hub gives those thinking of making the move from permanent to contracting an understanding of the challenges, obstacles, highs and lows of contracting as well as the perks of working for yourself. Here is a snapshot of just a few of their stories:
Life as a first time contractor
“I spent several years contracting as a data analyst for some large London-based firms before turning my hand to running information sites for the contracting industry.”
The advantages of working for yourself
“Even after more than 10 years of being a freelancer, the ability to go from bed to desk in all of about 15 seconds still never ceases to make me smile.”
Finding work as an IT contractor
“I had become jaded in my current job with only the photocopier as company, and knew I wanted more of a challenge. So after a bit of soul searching, I decided to go it alone as an IT contractor.”
The realities of life as a contractor
“It is not hard to see the appeal of becoming a contractor, but as I and many contractors before and after me have found, things are not always as simple as they seem. So what are the realities of life as a contractor?”
How to write a killer contractor CV
“You’re ready to embark upon a fresh, rewarding career as a contractor, but how do you sell yourself to potential clients? Using my experience of working on both sides of the fence, I’m going to share with you my top tips.”
Securing contracts as a freelancer
“So, after James had updated his CV, added up the cost of the benefits his current employer provided him with and registered with a few jobsites, he finally secured a position and was offered a role paying £400 per day.”
Negotiating the best rates as a contractor
“There are two broad approaches to getting the best rates, and I follow them both. One involves chasing short-term revenue (because I need to eat), and the other focuses on long-term career building.”
Choosing the right business format for you – as a limited company or an umbrella company.
“I had become fed up working for lousy bosses and knew I would find the world of contracting so much more rewarding. But before I started my new journey, I had a few things I needed to work out, firstly, my company structure.”
Comparing take home pay in an umbrella company and limited company
“Steve is using an umbrella company that charges him a monthly fee of 5% of his earnings and Julie had previously worked through an Umbrella company and decided it was time to go limited.”
The financial benefits of dividends and how to take money out of your limited company
“The main reason why I made the jump from a permie role into full-time contracting was the chance to at least double my earnings. The increased autonomy, freedom, and lack of office politics were all factors, but the main driver was financial reward.”
Getting the right accountant for you and your business
“Like moving banks or changing your energy supplier, changing your accountant may seem like a huge gamble and one which, you may think, requires months of meticulous planning. However, nothing could be further from the truth.”
“In April 2000 the IR35 legislation was introduced, which brought much confusion to the market. I could have used a simple, easy to follow guide to IR35 when it first became law so I hope you can benefit from my experiences.”
How expenses work as a contractor
“As a permanent employee, claiming expenses was a fairly simple process – I’d either pay for things with my company credit card, or use my own money and then claim it back. As a contractor, the process is pretty similar, you just need to be more aware of what you can legitimately claim for.”
How to contract?
Many looking to work for themselves might have heard about umbrella companies, where as a contractor you become an employee of the umbrella company. You then submit timesheets to the umbrella company who will then invoice the client and pay you as a PAYE employee. On average contractors will take home around 60% – 65% of their contract when working through an umbrella company, but these are usually ideal for contractors on short term contracts, around three months or less, on around £25k per year.
For those who are looking at contracting as a long term career expected to earn over £25k, a Limited company is often the most tax efficient option.
The benefits of a limited company:
More tax efficient – Many contractors choose to set up through their own Limited company rather than work under an umbrella company. This is themost tax efficient way of contracting depending on your contract rate. Typically, you can take home around 75% – 80% of your contract rate, which can equate to around £15,000 per year more on a £350 daily rate compared with using an umbrella company.
Claiming company expenses – As a Limited company you can claim on a wider range of expenses such as accountancy fees, IT equipment and software, phones and internet services, travel and other expenses which are part and parcel of you running your own business.
Flat Rate VAT scheme – Often limited company contractors have very few, if any expenses, which is why so many take advantage of the Flat Rate VAT Scheme. You are charged a flat rate on the income you generate rather than the current rate of 20%. This can save you £1000s for your business.
Limited company, limited liability – Working through your own Limited company means that if your business fails you cannot be personally liable for the debts. Therefore any personal assets, such as your house or car, are protected.
More credibility and lower costs – Operating as a Limited company can often give your company and your services more credibility with suppliers and clients. Knowing that you are taking your business seriously can make them feel that you will take their business seriously too.
Setting up your own Limited company
If you are thinking about a new company for a new year, then setting up your own Limited company is easy . . .
1. Choose your company name
This is the fun bit where you get to think up what your company stands for or what your service or brand is. For some it involves a name or a place, for others it’s a description of your service or product. It’s that simple… think of a name, and check it is available, this can be done on SJD’s free company name checker.
2. Form your company
If you go to www.sjdaccountancy.com it should take you around 5 minutes to register your company with you company formed within a few hours.
The cost of forming a Limited company with SJD Accountancy is £125 + VAT. For this you will receive VAT and PAYE registration, both can cost £75 each plus VAT if you apply separately. In addition, SJD provide online and telephone support to help you through the registration process.
Once you have formed your Limited company, you will receive all the necessary limited company documentation and an application for free business banking, VAT and PAYE registration details.
3. Appointing a good contractor accountant
Although Limited companies do require a little more paperwork and admin, it should only entail around 15 minutes every month or so, but what about the rest of the year? Sure for some an accountant may just be there to fill out the forms to HM Revenue and Customs, but what about financial advice, paperwork queries, tax deadlines… these are just some of the areas in which appointing the right accountant can benefit in growing your business.
SJD Accountancy offer an all-inclusive low cost fixed fee accountancy package which includes completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, all company returns, plus your own dedicated accountant who you can meet with, call and email as often as you like at no additional cost, all for just £120 plus VAT per month.
Claire Johnson, Managing Director at SJD Accountancy comments, “We have seen a huge growth this year in people becoming contractors and forming limited companies. The double dip recession and the panic that this was caused has made many people want to be in charge of their own destiny and take the initiative to become their own boss. Many are amazed, and relieved, to realise that having a Limited company really isn’t that hard work. We like to work alongside our clients to advise and consult them on the best option for them, to support their businesses to be as successful and profitable as possible.”
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