Setting up as a contractor

[SnowinBerlin]

I'm a student and have recently been offered some freelance work over the holidays, but will need to set up as an independent contractor. It's 10 weeks research work for a company I used to work for, so it's legit.

Looking for advice online, most sites tend to push people towards umbrella companies which do the admin but for a cut of your wages. Are there any online guides to setting up on your own and would you recommend this as straightforward?

As a poor mature student with a child, I'd rather do it myself if possible, rather than pay a company. The money saved will be spent on books rather than beer!

Go to a local book-keeper/small accountant. The cost of setting up a (limited) company is about £150.00. You may well want to go down the "limited" option to protect your own assets and yourself from the activities of your company.

Thanks for the tip. Can I assume it's pretty easy to set up as a limited company? The tax and NI should be pretty straightforward - I'd be working in the company office which is a short walk from my home, so no travel expenses and I'd be using their computers and phones etc.

If you will be working in their office using their phones and it's for 10 weeks why on earth would you need to set up a limited company and get an accountant. It's a summer job! Why can't they employ you, either as a regular employee or a casual worker?

I know Flowery! It's a small firm in a niche industry, but bought out and owned by a FTSE100 company who keep it at arms length and their HQ beancounters have said that independent contractor is the way they want to proceed as I'm selling my research services directly to a discreet business unit within the small company.

I will actually be getting £20 per hour so I am prepared to put myself through lots of administrative pain for that sort of wage. Many of my fellow students are struggling with minimum wage summer jobs, so even though I think they are a bit daft in the way they want to formalise it, I'm happy to grin and bear it.

i don't think it would be worth going the ltd company route for 10 weeks - an umbrella might work out cheaper - say they charge £30 a week an accountant might well charge £80-£100 a month, plus you'd have the initial setup fee.

You could set up a ltd company yourself at companies house for 20 quid. You only need one person to be a director these days. Really not that much hassle to do end of year accounts by yourself. Also means you could spread your wages to minimise tax/ NI contributions. Also books could be purchased through the business which would count as capital expenditure further reducing your tax liabilities.

Setting up lmt company is not that hard and there are tax benefits, though maybe at that threshold it will be borderline (ie you will be making just about the personal allowance I think.) If you have worked for them before, it sounds like they may contract you again?

I am an IT contractor and there are a lot of accountancy firms that will set up the company and do your books for a low monthly fee. Again, probably not right for you as you are only doing this for two months but if you call one, they can talk you through the steps. I use an online accounting tool called freeagent which makes the admin side of things very easy.

That said, I do know people who have done it themselves - it's not rocket science but you do have to be on the ball.

Thanks everyone for their contribution

You can be a sole trader rather than a limited company.

I wouldn't become a limited company, extra admin & cost for what? Limited companies help protect you personally against losses but I can't see that you have any outlays.

Become a sole trader, invoice the company monthly (or fortnightly if you can get away with it) then just fill in a very simple self assessment form by 31st Jan 2016. You will need to contact HMRC to tell them you are self employed & you'll probably get a bill for National Insurance.

They may insist you become a limited company to avoid IR35 issues although for 10 weeks' work that seems v OTT. One of my clients did (but the contract was 3 days/week for a year)

Becoming a limited company doesn't avoid IR35 issues, although you can specify in the contract that you are liable for any employment tax arising.

Doesn't it? My client wouldn't have used me unless I changed from being a sole trader to ltd company. They're a massive international accountancy firm so I believed them! I'm not sure I'd want the hassle for a few weeks of work though and would just be self-employed for that.

OP you can be self-employed and also work in a job if you want. And you can do all the admin yourself - it's very easy and if you do your tax return online, HMRC automatically works out your tax liabilities.

I would just set yourself up as a sole trader - which is how I operate. I have never used an accountant (it's only worth it if your expenses are complicated or you're buying a lot of kit). You just need to pay class 2 NIC contributions (though you can apply for a low earnings exemption, which might apply in your case) and then do a tax self assessment at the end of the year. You can just sign up on the HMRC website. Lots of people seem to make it seem more scary and complicated than it needs to be!

Yeah, what dotty said.

Odd, being a company also meant you could take out pii insurance which might have been important to them.