Becoming a contractor programmer in the UK

https://github.com/tadast/switching-to-contracting-uk/tree/formationsfactory

by timooo • 11 years ago

232 159 11 years ago

github.com

warrenmiller• 11 years ago

Crunch are aces.

astannard2• 11 years ago

inniAccounts are good too but I am very biased as I work for them.

cjrp3• 11 years 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.

ownagefool5• 11 years ago

I use Maslins who provide freeagent. They respond emails within the hour usually.

junto• 11 years ago

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

CharlesFinley2• 11 years 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.

batou3• 11 years 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)

jacquesm3• 11 years 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.

klausjensen• 11 years ago

How do you find out who are the good contracting recruiters if you are interested in contracting in London/UK?

It is such a massive grey mass of companies, if you just google it or try to search LinkedIn.

awjr• 11 years ago

You will find some agencies insist on a company bank account.

UK-AL2• 11 years ago

I don't why people find it so hard to setup ltd and + bank accounts. I know 18 yo who do this for there small business. It isn't hard. Accountant will sort most of it.

drtse4• 11 years ago

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.

I'm wondering if opening an LTD is even really needed in this case, what about people that already have a company or similar(sole trader) for this purpose in their own country? Have someone had any experience with this approach? Or has any idea about how it could be perceived?

crdb• 11 years ago

I can speak only for Singapore, but banks here require very high deposits and minimum required balance if you are not a Singaporean company (at least when I asked, it was ~$50,000 - still better than UBS in Switzerland who wanted CHF 100,000 four years ago).

We're one half UK resident, one half not, and the UK bank put up the fraud check, which required about 30 pages of paperwork including three different proofs of ID copied and authenticated by a notary public (cost me $30). They were and are ultra slow and do not accept any form of internet communication - only snail mail, phone and in-person counter service.

gedrap• 11 years ago

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

jackgavigan• 11 years ago

The previous discussion - 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.

peteretep12• 11 years 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...

PovilasID• 11 years ago

"Actually it's now super easy online using HMRC's site now” - You probably have Companies House in mind. HMRC deals with things like VAT and PAYE registrations. Companies House can be used for company incorporations. Furthermore, you can only use Model Articles on Companies House website. This means that you cannot set up multiple share classes during company incorporation (e.g. voting shares, profit sharing shares).

UK-AL2• 11 years ago

I would expect contractors would not need those.

wfn• 11 years ago

This means that you cannot set up multiple share classes during company incorporation

You actually can - you have to select from a pre-given list of share classes, though, but I did a priority-and-ordinary shares setup thing online via companieshouse - unless that's not what you meant?

pjc50• 11 years ago

You can always do it "manually" by sending in your articles, the form, and your £25. I did this years ago for a company limited by guarantee.

kozhevnikov2• 11 years ago

    > change how dividend tax works

Is there a good summary you would recommend for accountancy-challenged developers? Should we get any leftovers in business bank account out through more dividends now and accrue higher personal income tax or wait and see?

majc22• 11 years ago

It depends on what your strategy is and the specifics of your situation. http://www.contractoruk.com/money/ifas_guide_avoiding_new_di... has a generic guide about the new dividend tax.

IMHO, just get an accountant.

medwezys3• 11 years ago

There isn't much you can do really. The overall increase in annual tax is not going to be that big. If my calculations are correct, if you want to pay yourself ~100k per year you'll end up paying 2-3% more tax.

https://www.crunch.co.uk/blog/contractor-advice/2015/07/09/w...

majc22• 11 years ago

Agree with all of this post.

The only thing I'd expand on is that there is a big difference between permy recruiters and contract recruiters. The best contract recruiters know that they will have roles to fill in 6 months time, so they're going to want to keep you on their 'roster'. The best contractors know that contract recruiter help you make more money.

drrob2• 11 years ago

Agree entirely. All my contracts come through recruiters, and I've never had a problem with them, once you get a good rapport going with a decent contract recruiter they'll do all the hard work for you.

gadders3• 11 years ago

> 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.

One other thing to bear in mind - if you apply for a job in Banking the credit history, criminal records, references etc check will take 2-3 weeks anyway.

dspillett2• 11 years 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.

peteretep12• 11 years 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.

tom-lord• 11 years ago

It's also worth noting that (at least in the UK) such notice periods are not legally binding.

You can only be forced to give a notice period up to your payroll pay frequency. So for example, if you get paid monthly then you cannot be sued for failing to give > 1 month's notice!

... But of course, most people will still honour their company's "3 month notice" (or whatever) period out of good faith, as it's generally a good idea not to burn bridges.

gadders3• 11 years ago

They are usually negotiable, though.

gutnor• 11 years ago

In London, I'm currently on a 2 month notice, however that has always seemed unusual to agents and people I interviewed with. Also, that's a fixed period for senior and junior position - in other companies I worked for, there was always a special clause like "4 weeks + 1 week/year after the Xth year, capped at Y weeks"

That must be very dependent on your company sector and market. Also, notice is generally reciprocal, so a bigger one is generally considered a benefit - as practically, the company has to pay you when they terminate you, but you can almost always negotiate a much shorter notice when you resign.

brc8• 11 years ago

Often the remainder of it is 'gardening leave' or just paid out as cash.

Where I worked, when the decision was made that someone was no longer going to be there, they didn't spend much time in the office.

marrs2• 11 years ago

I've never seen more than 1 month notice in a standard contract. Everyone I know who has had more than that negotiated it for themselves.

Keats2• 11 years ago

Agree with pretty much everything.

Recruiters are annoying but some companies will only hire contractors through recruiters so it's worth spending a little time dealing with them (but don't hesitate to stop talking to any that isn't professional, there are plenty others).

For the rate it depends on the language and the industry as well, java in finance is always going to be higher than python in a startup but if it's below 300/350 you can walk away.

I stopped being a contractor last year, i'll have to check those dividend tax changes

CodeSimian• 11 years ago

What made you do the switch back to permanent?

colinramsay3• 11 years ago

Does anyone have any experience with a company like Giant or similar? Do they allow contractors who remote work?

peteretep12• 11 years ago

People I know who've worked with them are pretty happy. They've got a reputation for being super super responsive, too, so email or ring them and ask?

cjrp3• 11 years ago

They're just a middle-man who invoices on your behalf and pays you based on that. Using someone like Giant you're ceding a lot of the financial (tax) advantages of contracting though, since you pay tax as a PAYE employee.

drrob2• 11 years ago

In the past I've worked under Giant and Parasol. I used Giant back in 2008 when I wasn't sure if I was staying in contracting for forever. All umbrellas are much of a muchness; there's a legal limit on how much tax efficiency they can help you with, so you'll take home the same with whoever you choose. In the long term a limited company is definitely the way to go.

jchomali• 11 years ago

I totally agree

piotrp2• 11 years ago

For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing.

That seems pretty low to me. Here in the Netherlands contract developers get about the same, between £400-£600/pd (actually between 70~90 euro/hour) but cost of living is way lower than in central London.

tomelders2• 11 years ago

There's less supply in the Netherlands. I get a lot of offers here in London for contracts in the Netherlands.

radicalbyte• 11 years ago

Interesting, is that via an agency or via your own clients? I'm a Tech Lead and would like to start contracting at some point.

jwmoz2• 11 years ago

Where do you go for your contact leads in NL? I know the London market well but find it hard to find any decent Euro contracts.

SmellyGeekBoy2• 11 years ago

I'm in the Midlands and have no trouble finding work around the mid-high end of that range. Perhaps the streets of London aren't paved with gold after all. ;)

harel• 11 years ago

In the 14 months you've had the company registered, have you had any dealing with Inland Revenue inquiring about your accounts or coming to check up on you? I'm asking because at my current work they were always coming to check since the business got its funding. There was no wrong doing of course, but it did waste a lot of everybody's time.

peteretep12• 11 years ago

I've had ltd companies in various forms for ~ 10 years. No check-up yet, other than my most recent VAT registration, and even that was simply them asking me to send a few documents. I have no idea if that's typical, but I always buy tax investigation insurance.

brc8• 11 years ago

Amazing that 15 years ago I was making more than 400 pd (contract was actually 45 ph, and you could push overtime if you wanted) and I was pretty junior at the time. And I was only paying 130 pw rent in Zone 2.

Ah, boom times. Don't you just love 'em, and miss 'em when they're gone?

edit : original post had a calculation mistake in it.

davedx• 11 years ago

The math suggests you were working 13 hour days? Are you sure that's correct?

brc8• 11 years ago

On the 4 months savings thing.

When I arrived in London (as a foreigner fresh off the boat) I had about 4 weeks worth of money. I couch surfed and worked the recruiters endlessly and landed a job in 10 days. It wasn't the greatest job but it was a start - a 3 month contract building a new system. It's amazing how motivated you can be when you see your bank accounts date with destiny. After the contract was signed I used the remainder of my cash and got a 'bedsit' - a tiny room - and asked for my first weeks pay to be paid on Friday afternoon. Within a month I had a place to rent, a social scene and was busy working on getting the next job.

So if you don't have any dependents I think you can take the high risk plunge and go for it. Certainly the best decision I ever made in my entire life - and by that I mean life changing in a way that I cannot even imagine how my life would have been had I stayed on my prior path.

logingone• 11 years ago

In one of your other comments, you note that was in boom times.

fasteo• 11 years ago

>>> it took about an hour of filling in .gov.uk forms online. I would recommend just doing it yourself.

Here is a good guide from a gov.uk site [1]

[1] https://www.gov.uk/limited-company-formation/overview

colinramsay3• 11 years 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.

peteretep12• 11 years 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.

colinramsay3• 11 years ago

Perhaps true but:

- Are any remote? I mean who wants to live in London? ;)

- How do you find them in the first place?

squinn2• 11 years 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 ..

yetanotheracc2• 11 years ago

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

peteretep12• 11 years 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.

nikon2• 11 years ago

7.5% on your dividends. About 3k a year for a 100k earner... Nothing to go permie about.

benashford• 11 years ago

There's a calculator here: http://www.hl.co.uk/news/articles/budget-2015-changes-to-div...

mostlystatic• 11 years ago

In addition to the benefits you get as the contractor, agencies also don't want to hire sole traders as it could be argued they are actually employees. This would mean it's the agency's responsibility to withhold taxes, and the contractor would have rights to things like holiday and sick pay.

CharlesFinley2• 11 years ago

I would say the biggest advantage of a Ltd company is that company owners aren't required to pay their company’s debts beyond the value of their shares. Also, it offers a very tax-efficient methods to take money of the company. This is why you probably need to go to a company formation agent. They will be able to advise you on this matter. Try sending an email to these guys - https://www.formationsfactory.co.uk

drdaeman• 11 years ago

This depends on a country (sure, I understand the original post is about UK)

Say, in Russia one'd generally would want to go sole trader route and not an Ltd one. Less initial paperwork, a bit more relaxed tax/accounting rules (with same rates), and significantly simpler to put earned money into your wallet.

dogma1138• 11 years ago

You can go the "Self Employed" route in the UK just easily, it's a simple online registration and you get a VAT number and a tax code, but you really don't want to do that.

If you are self employed there is no liability protection that separates you from the business this means that for the business to go bankrupt you have to also go bankrupt, and worse creditors can go after your own and familial assets to clear debt that was incurred by your business.

Now in some rare cases when there was gross and often criminal misconduct the liability protection can be lifted on a business which means it's stakeholders can be found liable for damage but that's quite rare.

andy_ppp2• 11 years 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

tome• 11 years 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.

peteretep12• 11 years 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.

andy_ppp2• 11 years 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

[2] http://community.freeagent.com/freeagent

yetanotheracc2• 11 years 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?

gadders3• 11 years 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).

brc8• 11 years 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.

jacquesm3• 11 years ago

I wrote a whole series of pages on this subject condensing the last 30 years or so:

http://jacquesmattheij.com/be-consultant/

The idea was to one day bind this all together and make it a book.

peteretep12• 11 years 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.

jacquesm3• 11 years 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.

ravibhatt2• 11 years 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.

brc8• 11 years ago

Good list. I would also add:

- don't trust agents - don't trust agents One more thing: - don't trust agents

If you find a half-honest one work with them as much as you can. They'll still try and screw you over but they might decide to be straight once in a while.

I don't blame them in a way - the competition is fierce and matching client and contractor for happy outcomes is hard. But too many of them are willing to try and renegotiate your rate down after an offer is made - 'they like you, but not at your original rate' - 99/100 this is a ruse to keep some pounds in their pocket. Learn to be firm with agents.

Find out who makes the decisions on hiring and who has budget within a company and get to know them personally. They're the ones signing your pay.

I contracted for nearly 10 years in a variety of places. It's a great life but you do have to keep an eye on your career as your skill set might start to get old, and it's hard to move onto the next thing because you don't get the chance to practice it. But I have friends who have been doing it for 20 years now, and they have made a great life out of it.

robmcm• 11 years ago

I always used agents over 3.5 years and never had any problems.

They are sales people though, and obviously there are bad ones. However they are providing a service to you, (and their client), often contractors that go direct are on a worse rate, get paid a lot less frequently (3 months after each month, vs weekly in some cases) and have to deal with tedious internal HR processes.

Some times after you get used to the industry you have enough contacts to go direct, but initially an agent can really help you out.

jasonwocky2• 11 years ago

Good list, but as a contractor in the US, the one thing that sticks out that I don't agree with (necessarily) is:

-Getting 450 a day is always better than siting idle waiting for that 550-600 a day contract.

I'm fine with making a tradeoff like that for very short term work, but I don't want to commit myself to long- or medium-term work at any sort of significant discount.

If I'm confident I can get that 550 eventually, it easily pays for those days I spend on the beach.

ravibhatt2• 11 years ago

yes, do not take a 1-2 year contract on a low rate. But mathematically:

Lets say:

Desired rate: 150 Available rate: 100 Sit idle for desired rate: 30 days (20 working days in a month)

let's say a contract is 2 months long.

with 100 day rate yo get: 100 x 40 = 4000 with 150 day rate you get: 150 x 20 = 3000 (well if you get 200 a day, you still make the same amount of money as you would working on 100 for 2 months instead of 1)

Unless you get a significantly long contract on your desired rate. And also, that long contract gets till the end. Most likely it will, but life is bitch. You never know what would happen, it is about risk assessment.

lhorie• 11 years ago

What is the buying power $500-550 in the UK? (I'm trying to come up with a exchange-rate-adjusted ballpark for other countries)

nikon2• 11 years 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• 11 years 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• 11 years 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)

jheriko• 11 years 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• 11 years 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• 11 years 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• 11 years 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

mtberatwork2• 11 years ago

I would have a look around for developer job postings at your university instead of trying to track down and maintain commercial contracts.

sklogic2• 11 years 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.

ownagefool5• 11 years 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.

blater• 11 years ago

Meeting clients is more about freelancing, and some of the meetup groups are useful for networking there. For contracting I'd say the majority of people use jobserve. They advertise fixed term mostly fulltime contracts, usually 3-6months initial contract, and usually with at least 1 or 2 renewals expected if your work is ok.

hanoz• 11 years 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/ 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).

SmellyGeekBoy2• 11 years ago

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

DrJokepu• 11 years ago

Even VAT is fairly straightforward if you sign up for the VAT Flat Rate Scheme (assuming you're eligible). You'd probably need to pay for something like FreeAgent to help you with your VAT filings, but amount of money the Flat Rate Scheme would save you would easily pay for the cost of the bookkeeping application.

christoph• 11 years ago

+1 for Freeagent. We've been using it for 6 years now and still love it!

ZenoArrow• 11 years ago

Thank you for the advice.

acaloiar2• 11 years 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.

sklogic2• 11 years 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.

ownagefool5• 11 years 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.

acaloiar2• 11 years 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.

calpaterson• 11 years ago

Signed contracts are not guaranteed future revenue generation! An accountant would not for example allow you to recognise it as revenue in your accounts. Clients can go bankrupt, they can be slow to pay, they can not pay, etc etc.

Calculating how much capital you need to have in reserve before you go contract can be done using a couple of basic probability/finance measures. Look at reasonable worst cases (client bankruptcy, tax investigation, unexpected dismissal) and make sure that you have the current assets to survive them!

But you're doing this as an employee right? (Right!?) I hope everyone on this forum is going to be ok if they are made redundant tomorrow.

The whole point of this is that you need to be able to survive a setback. You should not be living at a 10% chance of missing rent each month! You can count on that probability eventually happening over a long enough period.

jwmoz2• 11 years 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• 11 years ago

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

borplk• 11 years ago

Is there an Australian version of this somewhere?

I wish people would replicate this for as many countries as possible.

JacobAldridge• 11 years 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.

Damerell• 11 years 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.

logiclabs2• 11 years 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• 11 years 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• 11 years 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• 11 years ago

Anybody have similar advice for the US?

FilterSweep• 11 years 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• 11 years 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• 11 years 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/Unite...

mavdi• 11 years 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.

mtberatwork2• 11 years 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• 11 years 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• 11 years 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• 11 years ago

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

medwezys3• 11 years ago

This is a good advice. Any links/advice where to start looking?

blueblueblue• 11 years 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.

astannard2• 11 years 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

macavity23• 11 years 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. :)

Becoming a contractor programmer in the UK

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