Setting up as an IT Contractor

gnolan

I hope this is the suitable forum for this question. I'm wondering about the best way to go about setting myself up as an IT Contractor. I'm currently in a permanent position and considering switching to a new contracting role. I've read some information on contracting here but have a lot of questions.

Ideally I'd like to hear from people in who have worked in contracting positions.

• What, in practice, are the primary advantages and disadvantages of a contracting position over a permanent position?
• There seems to be quite a lot of admin and paperwork - do most people hire accountants as suggested in the article?
• How much can one expect to pay for a reputable accountant?
• Do most people set themselves up as a Limited Company rather than a Sole Trader?

Any other insights would be greatly appreciated. Ideally I'm looking to hear of peoples' practical experiences in setting themselves up - who they speak to to kick things off, any troubles they may have run into etc.

Kinet1c

• Company's who get you the contract will require you to be setup as a limited company
• Most people whom I know contract, will generally get setup with a 3rd party provider who will look after managing the paper work and taxes for a monthly fee. There are companies out there that could charge 80-100/month for looking after this for you and all you have to do is show up to work.
• Advantages can be more money in to your pocket as the company doesn't have to pay for pension/annual leave/other benefits that come with full time employees. You could also write off stuff like laptops/books etc as research/educational expenses against your income to reduce your tax bill.
• Disadvantages are the opposite to the above.. if you're out sick, you get no pay.

L.Jenkins

gnolan wrote: »

• What, in practice, are the primary advantages and disadvantages of a contracting position over a permanent position?
• There seems to be quite a lot of admin and paperwork - do most people hire accountants as suggested in the article?
• How much can one expect to pay for a reputable accountant?
• Do most people set themselves up as a Limited Company rather than a Sole Trader?

• Advantage, the ability to negotiate better pay than a permanent role could offer. Flexibility to work where you like and take time off between contracts.
• Disadvantage, uncertainty in whether a contract could be chopped at the drop of a hat and the added uncertainty that there could be a long unwanted stretch between contracts. As for related benefits besides pay, I don't get holidays, if I take time off, I lost money. If I want a pension or VHI, I pay for it myself.
• Admin and paper work, I get paid through an umbrella company. I don't see my earnings as adequate to go it alone.
• Not sure what an accountant would cost.
• Have a look at the advantages and disadvantages of becoming a sole trader or ltd company to see which suits you best.

yop

Contracting for over 4 years. Do all my own books, not a hard thing to do. Have an accountant and pay him 800 a year. I'm not setup as a company as no company has required me to do so in the 7 contracts I have worked.
Agree with the advantages and disadvantages above.

gnolan

Sorry for not coming back to this, I've been doing a good bit of research on this and reckon for my first contracting role I'd probably be best off just going with an umbrella company, even though I might take a bit of a hit at around €100 / month.

As an estimate, can anyone tell me on average what percentage of my day rate I can expect to get into my hand after tax and any umbrella fees? I've been estimating around 65% but don't know if it is likely to be more or less than this.

L.Jenkins

I'm on €900 a week and leave with €730 per week. My day rate is €180 and I leave with €146, so about 80% after PRSI, USC and Umbrella Company charges.

td2008

80% seems very high !

there's a calculator here op
http://www.iconaccounting.ie/tax-calculator/

Stheno

td2008 wrote: »

80% seems very high !

there's a calculator here op
http://www.iconaccounting.ie/tax-calculator/

Averaged over a year it's probably less, I am on more than that poster, and retain 65%, but without pension contributions, I do have expenses of about 10%, with pension I would retain 70% plus

Expenses are mostly travel related as I work across multiple sites, but spend more than 80% of my time on one site.

@ OP it's free to call one of the umbrella crowds and get advice and they will do this for you.

gnolan

Thanks for the replies.

I called a few umbrella companies and the retention rate for my own daily rate is pretty much consistent across the board at around 59 - 60%. That's with no expenses and working as an employee (not a director).

I was actually hoping for about 5% more retention to be honest but perhaps given the fact that I have no real expenses (that I can see) explains the 59%.