I have an interview for a contracting role on Monday which I’m very interested in. I’m currently in a permanent role. I’ve never contracted before. The job is a 12 month contract with a chance of renewing.

Q1 – How easy is it to get a mortgage as I’m currently looking at moving?

Q2 – If I set up a ltd company do I need a seperate bank account? (Ill get proper advice if I’m offered the job btw).

Sounds more like a normal job than contracting.

Q1 – there are “contractor mortgages” apparently although I’ve no experience with them.

Q2 – Yes, you need a business bank account which your Ltd uses. You have to do this, personal bank acct == no-no.

Is that a fixed term employment, or day rate work?
Beware IR35, otherwise answers as above.
I think you’d need 3 years books for a contractor mortgage.

Its a 12 month contract with a day rate.

allthepies – Member
Q1 – there are “contractor mortgages” apparently although I’ve no experience with them.

Q2 – Yes, you need a business bank account which your Ltd uses. You have to do this, personal bank acct == no-no.

This.

You can’t open a Ltd business account up unless you have a Ltd Company Redg No from Co Hse.
Beware VAT thresholds, either open an VAT account when Ltd Co set up or sharpish if you hit the threshold.
You can’t use Personal Accounts for Ltd companies.
You can use an Umberella if you don’t want to set up a Ltd Co. (do some research)

If this is likely to be a way of life, then I suggest Ltd. – easy to set up (30 quid and a form to companies house). “xcracer contracting Ltd” or some such will do.

Ltd invoices client (it’s the Ltd’s money), then the director(s) agree payment of salaries and/or dividends as appropriate. After which it’s your money.

Otherwise sole trader might be an option. Get an accountant to advise you about your options (that advice would be a legitimate business expense).

Depending on sector, take a little care in choosing an umbrella company – some seem to promise the moon on a stick, but a years worth of work starts to sound similar to an employment-like relationship.

VAT kicks in at £85K, at which point your clients bill goes up by 20%. It may be preferable to voluntarily register from the outset (and certainly if your rate indicates this would be passed in the year). VAT Info

Good luck… I haven’t looked back!

Umbrella is pointless. You cant claim home to work travel expenses so its 20 to 25 per week for nowt. Paye better if not going limited. You have to get ltd co set up before co tract start . Business bank account can take weeks to sort but ltd co takes no time so factor that in. Through an agency?

I got a 5 year fixed mortgage just before I left my staff job and started contracting. Saves a lot of hassle.

As mentioned, you’ll need a business bank account. RBS/NatWest were free for the first year. Not sure if that’s still the case.

I’ve been PAYE/Ltd Co since I started working 25 years ago… never struggled to get a normal mortgage.

I went contracting for the first time a couple of months ago, theres loads of useful information on the contractoruk.com website, i kept it simple and have just used sjd accountancy for everything, they registered my company, setup a bank account, vat, insurance for an inclusive monthly charge. It could probably be cheaper but it has made it pretty painless. I havent done anything with the mortgage yet though, i know im paying over the odds, i’d intended to do it before being made redundant but it all happened quicker than i expected. The above websites can advise/recommend mortgages too, but you might need to be doing it for a while first as mentioned above.

It took less than 2 weeks to get stuff sorted for me, was offered on Tuesday and started the contract on Monday 13 days later.

Isn’t step one finding out if it’s inside or outside IR35?

I’ve been PAYE/Ltd Co since I started working 25 years ago… never struggled to get a normal mortgage.

Why should you have had problems? It isn’t exactly unusual to be self employed. The OP situation is rather different as he wants to take up a contracting role then shortly after take out a mortgage.

Thanks for the feedback.

The agency states that it is outside ir35. I take it if this is in the contract, should it then be in ir35 the agency or client will be responsible for tax and ni costs.

I havent been offered anything yet and will get it properly checked before signing anything.

cheers

Some light reading for you (mentioned above)

http://www.contractoruk.com/first_timers/

In your situation, I would be tempted to persuade the company to give you a fixed term PAYE position, if that’s not possible, see if the agency will take you on temp basis. It means you can’t claim as many expenses etc nor be as tax efficient as possible, but it is loads less hassle. Do your sums and see which option is best for you.

I would be VERY wary of what any agency or client tells you about IR35 – it’s not them that decides, it’s the tax tribunal in 4 years time (check the contractor website).

First time I got a contractor mortgage, all they needed was the day rate, the contract and bank statements. The second time, it was 3 years accounts + the above. No idea what it would be now as I’ve been permie for 4 years.

Good luck 🙂

The agency states that it is outside ir35

It’s not for the agency to decide – HMRC will make the decision ultimately should you be investigated.

Any public sector work (NHS for example) is now all within IR35 though.

I would be VERY wary of what any agency or client tells you about IR35 – it’s not them that decides, it’s the tax tribunal in 4 years time (check the contractor website).

It’s now up to the client.

Any public sector work (NHS for example) is now all within IR35 though.

Most, not all

I have the same questions in my head for an inside IR35 rolling 6 month contract. I’ve been advised to go down umbrella route.

Just of interest then, if the client or agency say its outside or ir35 (and you get this statement in the contract) and make no deductions for tax/ni – and hmrc then later say its within ir35, whos liable for the additional payments?

Isn’t step one finding out if it’s inside or outside IR35?

Isn’t step one trying to find one outside IR35

using the new online thing from gov.uk which I believe is fact based on stuff thats been tested in court ,, pretty much unless your completely in control of every single thing your inside IR35 in fact I heard mutterings that working through an agency can also put you inside , after they had spoken with their legal they said yup you go to work for them and we will bill them separately , I had to go direct to the company , no contract in place nothing

its kind of like setting up a company and having to find the work for yourself

The agency might say its outside IR35 , the likelihood of standing up to scrutiny when HMRC come for their money , you won’t see hide nor hare of the agency.

In/out shake it all about eh.

Some Govt positions are outside of IR35 and are advertised as such, you just need to keep a keen eye on what is in the contract.

Best of luck, hope it works out for you.

IR35 aside, you can usually earn more as a contractor plus it gives you the flexibility of choosing the work you want.

And you’re the boss!

Ditto above, good luck 🙂

This is what the advert says

“Please note that the client has determined that the off-payroll working rules will not apply to this assignment.”

Any public sector work (NHS for example) is now all within IR35 though.

Not all of it.

On the mortgage question, you don’t necessarily need 3 years accounts, but I’d try and get it sorted before I gave up a permie role.
I applied for a mortgage in March, all that was asked was my day rate and length of the contract. And it’s at normal rates, no special premium etc.

On the mortgage front I managed to get one with just one year end of accounts. I went through a specialist broker which of course cost but given the 1 year of accounts made sense.

Mine was a remortgage but they offered to lend a substantial / ridiculous amount and took salary and dividends into account. I had be in 1 contract for 12 months and had just renewed for a further 6.

Ir35 does have to be watched but duration isn’t that good a measure. A specific programme engagement can easily last 2+ years in my industry and that doesn’t mean I am in Ir35. Equally it’s to be inside and only take weekly contracts.