I'd definitely echo what @ellativity has said. Also depending on how much you earn you may need to register for VAT, which depending on where in the world you're contracting can mean you need to pay VAT as well as other tax/NI contributions.
When setting up as a contractor you need to factor in the time and/or expenses for dealing with all this tax admin when you think about what rate you would charge for your services. For me, I have zero appetite to get into the weeds on financial stuff, and because I contract solely with a US-based company there's additional numbers to get one's head around in terms of currency conversion etc, so I work with an accountant specialising in sole traders/contractors. It costs me £150 per year for their services, and they keep me on the right track with all these things and prepare my Self Assessment tax return. It's a real weight off 😅
Some other expenses you need to consider -
Professional indemnity insurance: Technically, as a contractor you could end up in disagreements with clients over work delivered etc, and you might want to think about picking up insurance to protect you against this. Some insurance companies specialise in this kind of insurance for contractors, e.g. in the UK With Jack is used by a lot of tech professionals (myself included)
Income protection insurance: Working contract to contract means you might be at a higher risk of sustained period of times without cash coming in. This could either be because of gaps between contracts, or e.g. maternity/paternity, ill health, injury. Income protection insurance can help in these situations and provide a bit more peace of mind.
Personal pension: With no employer pension contributions, it's on you to make sure you're planning for retirement so you don't have to keep up with latest javascript frameworks in the year 2072 💀
Holidays: Make sure any rate you charge for services also takes into account you're gonna need some days off, as you're not going to be paid for those!
As with all expenses you might rack up as a contractor, you can factor all of these costs in to your charged rate, so they're not necessarily a downside. They're just something you need to be mindful of, and regardless if you hire an organisation or accountant to help you with it, you have to budget some of your time to dealing with it all.
regardless if you hire an organisation or accountant to help you with it, you have to budget some of your time to dealing with it all
And it's boring 😂 To answer the original question, I would much rather not need to deal with all this stuff, although contracting can give the freedoms other people mention around choosing who to work with / what to work on (and potentially a higher income, but again, need to weigh against the expenses).
Oh yeah, there's the original question, of course!
I don't really have a strong preference one way or another, tbh. I'm generally terrible at admin and find it a total drag, but I've been contracting/freelancing on-and-off for most of my working life, so it's just a thing that happens now.
The biggest pain is the initial starting up of a business and understanding the accounting flows in different countries. I've contracted, which means registering businesses and handling my own taxes in 4 countries at this point, and it doesn't get any easier the more times I do it!
The biggest pain is the initial starting up of a business and understanding the accounting flows in different countries
Yeah, it's true, once you get your head around the initial setup it's really not too much headache, especially if you decide to get an accountant to fill out your Self Assessment. And since I am a (happy) contractor despite my hatred of boring admin tasks, I guess currently the benefits for me are outweighing the negatives. I'd just rather have all the benefits without the boring admin (surely I'm not asking for so much 😂)
handling my own taxes in 4 countries at this point
😅 That's bringing me out in a cold sweat just thinking about it
I moved from the UK to France 3 years ago and I'm still dealing with the last bits of having tax stuff to do in two countries and I have an accountant 🤦
I'd definitely echo what @ellativity has said. Also depending on how much you earn you may need to register for VAT, which depending on where in the world you're contracting can mean you need to pay VAT as well as other tax/NI contributions.
When setting up as a contractor you need to factor in the time and/or expenses for dealing with all this tax admin when you think about what rate you would charge for your services. For me, I have zero appetite to get into the weeds on financial stuff, and because I contract solely with a US-based company there's additional numbers to get one's head around in terms of currency conversion etc, so I work with an accountant specialising in sole traders/contractors. It costs me £150 per year for their services, and they keep me on the right track with all these things and prepare my Self Assessment tax return. It's a real weight off 😅
Some other expenses you need to consider -
Professional indemnity insurance: Technically, as a contractor you could end up in disagreements with clients over work delivered etc, and you might want to think about picking up insurance to protect you against this. Some insurance companies specialise in this kind of insurance for contractors, e.g. in the UK With Jack is used by a lot of tech professionals (myself included)
Income protection insurance: Working contract to contract means you might be at a higher risk of sustained period of times without cash coming in. This could either be because of gaps between contracts, or e.g. maternity/paternity, ill health, injury. Income protection insurance can help in these situations and provide a bit more peace of mind.
Personal pension: With no employer pension contributions, it's on you to make sure you're planning for retirement so you don't have to keep up with latest javascript frameworks in the year 2072 💀
Holidays: Make sure any rate you charge for services also takes into account you're gonna need some days off, as you're not going to be paid for those!
As with all expenses you might rack up as a contractor, you can factor all of these costs in to your charged rate, so they're not necessarily a downside. They're just something you need to be mindful of, and regardless if you hire an organisation or accountant to help you with it, you have to budget some of your time to dealing with it all.
And it's boring 😂 To answer the original question, I would much rather not need to deal with all this stuff, although contracting can give the freedoms other people mention around choosing who to work with / what to work on (and potentially a higher income, but again, need to weigh against the expenses).
Oh yeah, there's the original question, of course!
I don't really have a strong preference one way or another, tbh. I'm generally terrible at admin and find it a total drag, but I've been contracting/freelancing on-and-off for most of my working life, so it's just a thing that happens now.
The biggest pain is the initial starting up of a business and understanding the accounting flows in different countries. I've contracted, which means registering businesses and handling my own taxes in 4 countries at this point, and it doesn't get any easier the more times I do it!
Yeah, it's true, once you get your head around the initial setup it's really not too much headache, especially if you decide to get an accountant to fill out your Self Assessment. And since I am a (happy) contractor despite my hatred of boring admin tasks, I guess currently the benefits for me are outweighing the negatives. I'd just rather have all the benefits without the boring admin (surely I'm not asking for so much 😂)
😅 That's bringing me out in a cold sweat just thinking about it
I moved from the UK to France 3 years ago and I'm still dealing with the last bits of having tax stuff to do in two countries and I have an accountant 🤦
Old tax stuff never seems to end, @erdo... Good luck with that! Hope you get to wave goodbye to HMRC soon!