Could you Earn more as a Professional Contractor?Posted Wednesday, September 4, 2019
By Jennifer Doyle, Solutions Team Manger, Contracting PLUS. Contracting offers great opportunities for skills development, flexibility in how and when you work, and greater career control. Then there’s also the financial benefits!
Don’t just take our word for it though… our online Take-Home Pay calculator will allow you to test this out yourself.
Here’s a few tips to keep in mind while you do…
Your Tax Band and Tax Credits:
Double check the tax bands and credits that are available to you and ensure that these are correct. If your Contract work is going to be the sole source of income, you should assign your tax bands and credits to the Umbrella or Limited company through which you are operating so that these can be applied on a monthly basis to your earnings.
You can check and change this information easily by reviewing your Tax Credit Certificate on your online ROS account
Increase in Rates as a Contractor
As a Contractor you are typically paid only for the days and hours that you work. In Ireland this the figure generally used is 232 days per year. (calculated as followed 365 minus weekends= 261 days, minus holidays 20 days =241 days, minus bank holidays of which there are 9 in Ireland leaves 232 working days).
Your daily (or hourly) rate of pay is increased to reflect the fact that you do not normally get paid for holidays or bank holidays. When comparing your potential contracting income to your current salary, you should account for an increase to reflect this. Generally speaking a premium of 20% is the norm.
This means that ultimately your gross invoice is already a higher amount before calculating any tax relief or tax deductions that will apply.
Use our Daily Rate Calculator for Professional Contractors to see what your daily rate as a Contractor would be.
As a Contractor, you can claim business expenses on a monthly basis. Essentially you receive tax relief on these expenses and claiming these costs can allow you to maximise your overall earnings.
Typical expenses may include mobile and internet costs, public transport tickets, any tools or equipment needed for your role, training and up-skilling costs and even relocation costs if you plan to move for a new role. Read our blog for more information. It’s important that you work with a provider who will give you quality and proactive advice on the different expense costs allowable and how you can offset these. In Contracting PLUS, your Dedicated Account Manager will ensure you’re well supported in this area!
A pension is an extremely tax efficient way of saving for the future. As a company director (of your own Personal Company, or as a director of an Umbrella company) you can make contributions through the limited company structure and claim full tax relief on these each month, which will significantly impact on your overall retention of income.
Our Contractor Pension and Protection team, CWM Wealth Management are on hand to assist and will provide you with free personalised advice on the various plans available. Your Dedicated Account Manager will be happy to make an appointment for you.
Quality advice and guidance on how best to operate will allow you to ensure that you’re making the most of each Contract position. Our team are available for any queries and are happy to organise personalised estimations for you based on your individual circumstances. Get in touch with our Solutions Team today on 1800 545422.