What makes a successful contractor or freelancer?

What makes a successful contractor or freelancer?

 

If we were able to provide a magic formula that instantly gave you the success you always dreamt of, we’d be very rich! But sadly your success is down to your own hard work, graft, and pure determination (with a little luck thrown in).

 

So without a fairy godmother on speed dial or magic beans to fall back on, to what do other freelancers and contractors owe their success? In this blog, we share some feedback from successful Intouch clients, on how they got to where they are today.

 

Be a success from the outset – take the leap into contracting

Leaving the security that permanent employment provides can be daunting, and takes a lot of courage. But becoming your own boss can be extremely rewarding, as you call the shots, decide on your working hours and who you work for.

 

Our first contractor insight comes from Intouch client Alex Patron of Ctrl Cee Limited:

 

“Contracting is a fantastic way to build up your experience in a shorter space than you would if you stayed in permanent employment. Don’t be afraid of change and embrace the freedom contracting provides.”

 

Variety is certainly the spice of life for contractors and freelancers, as the industry is ever changing and two contracts are never exactly the same. If you want to gather a large amount of experience in a short space of time, then it’s time to consider a contracting career.

 

Learning new skills and develop existing ones

Fast-tracking the learning of new skills is a huge benefit of contracting. Many of our clients have found that the independence contracting provides allows the freedom to professionally develop their skills and learn at a greater speed than if they were still in permanent employment.

 

Our second client insight comes from Paul Davies of Sunny Robot Limited:

 

I’ve only been contracting for a short time, but the benefits have already changed. I am constantly developing myself as a product, and the new skills I’m developing are my main driving force.

 

By constantly updating and developing your skills you’ll always be a desirable candidate for future clients. The exposure you’ll get from each and every contract you complete will show you what different industries are like, what they need and how you’re able to give it to them. As a contractor or freelancer you’ll never stop learning, and never work the same day twice!

 

Having the confidence to step out of your comfort zone

From time to time you’ll come across a contract or client that you might consider ‘out of your league’. But if you always stay within your comfort zone you’ll never develop both your professional skills or confidence, and get to the level (and day rate) you truly deserve.

 

David Martin of Comprehend Solutions Limited shares his beliefs when it comes to being confident in yourself as a contractor:

 

My advice if you’re considering a career in contracting is to go for it! Have confidence in your choices; if you were successful in permanent employment and enjoy meeting new people then you’ll succeed as a contractor.

 

Stop wasting your precious time

As a contractor or freelancer you’ll either be busy working on your latest contract, looking for your next client or enjoying your free time – so why waste any of it trying to make sense of your accounts?

 

Part of being successful is knowing when to ask for help and outsource tasks that take up your time. Enlist the services of a contractor accountant who’s able to help manage your accounts and keep you updated with changes to legislation. Find out today how we can make your life easier, with our all-inclusive monthly service.
Success is yours if you dare to dream and take the leap. Let Intouch be your guide to contracting or freelancing success.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Why client testimonials and referrals are so great and how to get more

Client testimonials and referrals

We are all consumers, and at some point in our lives we’ve been wowed by super slick websites, seduced by a product’s ability to answer our needs, or simply impressed by the marketing efforts that have gone into promoting something. Yet in today’s marketplace, people still rely heavily on reviews – what people actually think of the product or service, and whether they’d recommend it.

 

The same can be said for freelancers and contractors. Whilst you’d hope that your experience and skills would be enough, some still need to hear the thoughts of others to be convinced you’re up to the task. So how do you achieve more testimonials and referrals from your clients? In this blog, We explore just that, with some top tips every self-employed person can adopt.

 

Referrals and trust – one cannot exist without the other

As a testimonial and referral is an insight into someone’s personal thoughts and feelings, a certain level of trust must exist for them to part with such information. After all, you wouldn’t endorse something in your name if you didn’t believe in it.

 

So how do you get a client to trust you enough to refer you? It’s a tough question to answer as all clients are different, but the easiest way is to ensure you complete your contract on time, on budget and with minimal (if any) hiccups.

 

Understand how to approach the subject of a testimonial or referral

Before you ask your client if they’d like to provide you with one, remember that you’re not begging for something you don’t deserve. You’ve completed the contract to the requested specification and have proven that you’ve done it well.

 

It’s important to let the client know what impact testimonials and referrals can have on your professional development and how word-of-mouth promotion is integral to your future success. If they refuse then sadly there’s not much you can do, but by requesting one you’re letting them know of your expectations and why it’s important to you.

 

Consider them as transactions

This tip may not be everyone’s cup of tea, but if you have a good relationship with your client it’s worth considering offering an incentive for their testimonial or referral. This could be seen by some as a bribe, so use your professional judgement here whether it’s an appropriate step to take.

 

Your incentive could be something as simple as a referral in return or discount for future work, because if they’re willing to refer you then they will possibly look to hire you for a future contract.

 

Remember that it’s not all just about you

Your client will know that as a freelancer or contractor you’re part of a bigger network, and that you will have your own opinions of them. So whilst their referral could open more doors for you, your thoughts on them could potentially put other freelancers or contractors off from working with them in the future.

 

If you have colleagues who possess skills that the client needs for future projects, let them know. You’ve essentially then shown the client that you care about their organisation and want them to succeed, even without your help. This will leave the client with a positive parting impression.

 

It’s time to show them off!

Don’t forget that once you’ve earnt those blinding reviews it’s time to show them off. Add them to your LinkedIn profile, professional website, or even material you send out to prospective clients, but just double check your client is happy for their comments to be made public. Always ensure that future clients can see what past clients have to say about your work.

Do you have tips for getting referrals that have worked in the past? Share them with us! We’d love to hear what’s worked for you.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Spring Budget 2017 – what contractors need to know

Following the Chancellor’s first and last Spring Budget on 8 March 2017, many will be thankful that the landscape has not changed more drastically. The Budget primarily confirmed the changes announced in the Autumn Statement, with only a few new measures that will affect Limited Company contractors.

 

We have today emailed our clients with our full report on the Budget announcements and how they may be affected. Please see below for a summary of the key points and contact us to find out more about becoming an Intouch client and benefiting from our expert advice tailored to your personal circumstances.

 

Key Spring Budget points for Limited Company contractors:

  • Dividend Allowance: An announcement that didn’t appear in the Autumn Statement – a reduction in the tax-free Dividend Allowance from 6 April 2018. The allowance will reduce from £5,000 to £2,000.
  • ISA savings limit: The Chancellor counter-balanced the Dividend Allowance changes by also announcing that the overall ISA savings limit will jump to £20,000 in 2017/18, from the current limit of £15,240 for 2016/17.
  • Off-payroll working in the public sector (IR35): Whilst some minor changes to the draft legislation have been made, the measures will become effective on 6 April 2017.
  • VAT Flat Rate Scheme (FRS): As announced in the Autumn Statement, changes to the VAT Flat Rate Scheme (FRS) will come into place on 1 April 2017 with the introduction of a new ‘limited cost business’ category.
  • New measures to tackle tax avoidance and evasion: A selection of measures has been announced, with the most notable new measure applying to those that enable tax avoidance schemes. A new Enabler penalty will apply when tax avoidance schemes are found not to work.
  • Corporation Tax: As pre-announced, the main rate of Corporation Tax will be reduced from 20% to 19% for the Financial Year beginning on 1 April 2017.
  • Corporate Gains Tax: The CGT annual exemption will be increased to £11,300 for 2017/18 from £11,100 for 2016/17.
  • Making Tax Digital for Business: Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business. The Spring Budget announced a one year deferral from the mandating of MTDfB for unincorporated businesses and unincorporated buy to let landlords with turnovers below the VAT threshold (£83,000).
  • New consultations announced: Those notably likely to affect contractors include consultations on Rent a Room Relief, disguised remuneration (again), employee expenses and Benefits in Kind.

 

Further information

 

Still got questions? Our Personal Accountants are available right now to give tailored advice to our clients on how these announcements will affect them. Contact us to find out more about becoming an Intouch client.

VAT Flat Rate Scheme and limited cost traders – what’s new

New draft legislation for FRS: Limited cost traders

Yesterday HMRC released their draft legislation on the proposed changes to the VAT Flat Rate Scheme (FRS), including the addition of a new ‘limited cost trader’ category. These changes are designed to stop abusive use of the scheme and appear very successful in doing so. The draft legislation is now subject to an eight week consultation period and provides us all with a very short window to be heard before the draft becomes final.

 

In this blog we cover what was included in the draft legislation, how it affects Limited Company contractors, and what’s yet to come.

 

How things are changing

From 1 April 2017, a new flat rate category will be established, called “limited cost business”.

 

All businesses registered under FRS must consider whether they fall within the definition of this category and, if so, the percentage to be applied is 16.5%. The test must be repeated for every accounting period and the new category applied where appropriate.

 

This new rate will remove largely all of the perceived cash advantage arising from the FRS for businesses, with limited costs with the 16.5% producing a benefit likely to be less than claiming the actual VAT input tax on purchases.

 

What is a ‘limited cost trader’?

One whose VAT inclusive expenditure on goods is either:

 

  • Less than 2% of their VAT inclusive turnover during the accounting period, or
  • Greater than 2% of their VAT inclusive turnover, but less than £1,000 per annum if the prescribed accounting period is one year, or time apportioned if not.

 

Claimable goods

The key element to this test is what ‘goods’ means. In VAT terms, purchases are either goods or services. Goods is generally understood to mean tangible items where legal title passes on acquisition. Services are everything else.

 

The draft legislation refers to relevant goods which are any goods purchased wholly and exclusively for use by the business. This automatically excludes any purchases for goods that have a mixed personal element. In addition, however, the following items are excluded:

 

  • Capital expenditure (goods such as equipment, computers, mobile phones, office furniture, a tablet or printer). It does not matter if the purchase is not capitalised in your accounts, the question is one of duration of its use.
  • Food or drink purchased for the consumption by the business, or its employees. This would include subsistence whilst travelling.
  • If the business owns a vehicle, all costs relating to that vehicle including parts and fuel.

 

What about expenditure on services?

Well, these appear to be entirely excluded, therefore you will not be able to include travel costs such as train fares and flights, mileage claims, parking, software, subscriptions, accountancy fees, legal services etc.

 

Taking the test and the online tool

Registered businesses will need to conduct a test every accounting period. The legislation does not say whether they mean the VAT Return accounting period or the business accounting period. The £1,000 however, is an annual limit and so would need to be apportioned to reflect the period considered. Clarity will come forth in the guidance in due course.

 

HMRC recognise that it may not be clear to many whether they fall within the new category and intend to release an online tool to help make the right choice. The tool is not yet available so we can’t assess how useful it will be.

 

For many Limited Company contractors, it will be clear whether the value of their goods is above the threshold. However, some may be close to the threshold and therefore will need to rely on the online test to determine whether they’re above or below.

 

What’s next?

HMRC have allowed eight weeks for comments on the consultation document. During this time, they claim they will engage with representative bodies, to explore the practical implementation of the test and the online calculator.

 

Until HMRC’s calculator has been created, we are encouraging Intouch clients to use our Flat Rate Scheme calculator to understand how they could be affected.

 

What Intouch would like to see

HMRC’s current definition of “goods” is far too ambiguous for Limited Company contractors to understand fully how they are affected. Many service businesses, including contractors using Limited Companies, incur substantial business costs that appear to fall outside the scope of relevant goods. This leads to the unintended consequence whereby legitimate users of FRS will be disadvantaged.

 

This is wrong and Intouch will be participating in the consultation to draw HMRC’s attention to this outcome whereby legitimate contractors are forced into an inappropriate category that does not adequately reflect their cost structure.

 

At Intouch we want them to look again at how they define relevant goods and amend the legislation to include services used solely by the business.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

The contractors’ warchest – spend or save?

The contractors’ warchest

Most Limited Company contractors or freelancers build up a warchest, to ensure they are covered financially for any breaks in contracting. Having provisions for such an occurrence makes perfect business sense, but what happens when your warchest is a rather substantial size? Should you spend or save?

 

You’ve just started contracting – what next?

When first starting out in contracting there are lots of new things to get to grips with, most of which your specialist contractor accountant can advise and support you on. But when it comes to building your warchest, this usually happens in your second year. There is no one-size-fits-all answer to this, as everyone’s needs and future plans are different.

 

So to prepare you in your first year of contracting, we’d advise ensuring there’s enough money in your business bank account/s to pay all liabilities (such as taxes due) plus your personal salary and dividends. Once you’ve established you can do this (with profits left in your company) then it’s time to consider your warchest.

 

What are the options?

Once you’re in your second year and have reached your ISA allowance of £15,240 it’s time to consider what to do with the profit left in your company.

 

One option is to leave it be for a rainy day or break in contracting. Whilst this is strongly advisable for all contractors who are planning to remain in contracting for the foreseeable future, it’s not always the right option for everyone, especially if you’re close to retiring or returning to permanent employment for good.

 

Another option is to take money out of your Limited Company as dividends over the higher rate.

 

Whilst our team of expert contractor accountants can advise you from an accountancy point of view, once you have made the decision to take money out of your warchest, we strongly advise that you appoint an independent Financial Adviser. Here at Intouch Accounting, we recommend Penny Matters, who can provide you with tailored advice on mortgages, pensions, life cover and much more.

 

Set a target to work towards

A good starting point with your warchest is to consider a target you’d like to reach, then ensure you get there before deciding what you’re going to do with your funds. It’s very easy to see the amount steadily getting larger and starting to let your mind run wild, but ensure you speak to your contractor accountant about a realistic financial goal and how you can reach it.

 

Remember! Your financial obligations as a Limited Company contractor must always come first, so ensure your ducks are in a row before deciding on what to spend your profits on.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

The new tax year – how today’s changes could impact your contracting life

The new tax year

Today marks the start of the new tax year, that will bring changes which could affect many contractors’ take home pay. In this blog we outline the top 10 changes, to ensure you’re fully prepared.

 

1Dividend allowance

The first £5,000 you take in dividends annually will be tax free (this is on top of the income tax personal allowance), then anything over that will be taxed at the following rates:

Basic rate: 7.5%

Higher rate: 32.5%

Additional rate: 38.1%

 

Our new dividend calculator will give you a clear indication as to how much more tax you’ll pay for 2016/17.

 

Tax will not be deducted at source and taxpayers will have to use their Self Assessment Tax Return (SATR) to pay any tax owed. So basic rate taxpayers receiving £5,000 or more must complete a SATR.

 

2. Capital Gains Tax (CGT) will reduce

If you sell an asset that has gone up in value, then CGT is the tax you will have to pay on that asset. Depending on the rate of income tax you pay, CGT will either be payable at the basic or higher rate. If you’re selling residential property, CGT only applies to any additional properties you may have (other than your main home).

 

From today the rates for CGT are:

Basic rate: cut from 18% to 10%

Higher rate: cut from 28% to 20%

 

3. Flexible ISA

From today should you wish to withdraw and replace your ISA funds within the same tax year, you will not lose the full ISA tax benefits.

 

If you have money in stocks and shares ISAs you should also be able to do the same, if you withdraw and replace via a cash trading account.

 

4. Personal Saving Allowance

Anyone aged 18 + will be able to earn up to £1,000 a year on their personal savings – tax free.

Take a look at the tax rate bands to see how you can benefit:

  • Basic-rate (20%) taxpayerscan earn £1,000 of savings tax free (saving a maximum of £200 compared with 2015/16 tax year).
  • Higher-rate (40%) taxpayers can get a personal savings allowance of £500 (saving a maximum of £200 compared with 2015/16 tax year).
  • Additional-rate (45%) taxpayers earning above £150,000: £0unfortunately do not get an allowance.

 

See the Treasury’s factsheet for more information. The Personal Savings Allowance is being dubbed as the ‘biggest savings shake-up for a generation’, so don’t miss out!

 

5. Income Tax and Personal Allowance thresholds increase

Taxable income rate: from today will rise from £10,600 to £11,000

Higher rate income tax: the 40p threshold will rise from £42,385 to £43,000

 

6.New State Pension is introduced; current state pension rises

You will receive the new State Pension if you retire today and are:

Female: born on or after 6 April 1953

Male: born on or after 6 April 1951

 

The flat rate State Pension is £155.65 per week but the amount you’ll receive will depend on your National Insurance (NI) contributions:

35 years of NI contributions: you qualify for the full allowance

At least 10 years of NI contributions: to qualify for part of the weekly allowance

Less than 10 years of NI contributions: you will not receive any of the State Pension

 

If you retired earlier, you’ll receive the old state pension, which will increase to £119.30.

 

7. Innovative Finance ISA (IFISA) will launch

If you use peer-to-peer (P2P) platforms to save then the new IFISA will allow you to get tax free returns. Whilst one of the attractive qualities is the higher rates of interest, it’s worth being aware that P2P isn’t protected by the Financial Services Compensation Scheme (FSCS).

 

8. Lifetime Allowance cut

Today will see a reduction in the amount you can save into your pension without a tax charge – AKA your Lifetime Allowance – from £1.25m to £1m. Your pension benefits are tested against the lifetime allowance as soon as you start to draw your benefits.

 

Despite the government’s claims that the reduction will only impact 4% of the wealthiest population, it will also hit those people working hard to save for retirement. You can protect your pot if it exceeds the Lifetime Allowance.

 

Remember! Be careful with Auto-Enrolment, as any contributions you make could wipe out any protection you may have. We advise that you discuss this with an Independent Financial Adviser, to ensure you have the right advice and support for you and your circumstances.

 

9. Annual Allowance Taper will be introduced

For higher earners, the annual pension allowance will gradually be reduced. At present it’s set at £40,000, but the government is set to introduce a taper system that will reduce the limit for those whose income exceeds £150,000. The reduction rate will be set at £1 for every £2 of income, meaning that if you’re earning £210,000 or more, your annual allowance will be reduced to £10,000.

 

10.National Living Wage and Stamp Duty Land Tax increases

Both have already been enforced, as from 1 April:

 

National Living Wage (NLW): anyone aged 25 or over will receive £7.20p/h, an increase from the previous NLW of £6.50p/h.

Stamp Duty Surcharge: an additional 3% has been added onto the current stamp duty rates for anyone who purchases a second home or a buy-to-let property. Whether you’ll have to pay or not will depend on your individual circumstances. But it is likely to hit tenants who are charged more rent to cover the additional cost to their landlord’s.

 

So there you have it, 10 changes for the new tax year that every contractor should be aware of. If you’re wondering what these changes will mean for you, we’ve created our top 10 new tax year resolutions to aid contractors in staying financially fit this new tax year. Download them today for the ultimate in contracting success.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

What makes a successful contractor?

What makes a successful contractor?

At Intouch, we constantly strive to deepen our understanding of the contractor landscape so that we can provide the best possible service to our clients and help them to become a successful contractor.

 

Over the past few months, we have been carrying out research so as to provide us with the insight we need to provide a tailor made service to contractors in a number of different sectors.

 

It’s great to get feedback and to know the service we provide is hitting the mark as well as ways to make it even more beneficial to the UK’s contractor workforce.

 

Through talking to clients and contacts in the industry, we have gathered some invaluable insight. Some of this feedback is just too good to keep to ourselves, so we have collated any information that could help contractors to get a head start or a leap up the ladder. We’ve also identified some key Do’s and Don’ts to watch out for.

 

Making a successful switch to contracting

Generally, it is the flexibility and control of contracting that pulls people away from permanent employment and into a more temporary way of working.

 

Contractors say that it isn’t an easy option. However, it can be a very empowering way to work as you have far more control over your working hours and conditions – making it a great option for those with family commitments or other interests outside of work.

 

“Contracting can be feast or famine but it is a great way to use your experience built up over many years. Don’t be afraid of the change and embrace the freedom contracting can provide.” Alex Paton, Ctrl Cee Limited

 

The frequently changing nature of contracting provides good opportunity for variety. As I’ve written about before, switching contracts and even industries is a great way to keep a career fresh and gather a wide range of experience.

 

The ability to learn new skills and develop existing ones is another big draw, as well as the independence, responsibility and reward of being the actual product.

 

“Although I’ve only been contracting for a short time, the benefits have changed since I started out. Firstly it was purely financial. Once my confidence grew as a developer and by constantly striving to develop myself as a product, the skills benefit has now become my main driving force.” Paul Davies, Sunny Robot Limited

 

Of course, the financial aspect plays a part and being able to make the most of your income is a very good reason to start contracting. Those bringing in an income of over £25,000pa tend to create Limited Companies to maximise earnings even further. In our recent survey of IT professionals, we found 69% of those who were contracting were doing so as a Limited Company.

 

The Art of Contracting

As with everything, the path to contracting success isn’t always smooth. Here are some of the key lessons a few of our clients have learned along the way:

Do:

  • be positive and professional at all times. Every meeting is a potential job interview and you are living your personal brand at all times
  • make sure you know what only you bring to the role and get a measurable deliverable to focus on (even if you create this yourself)
  • keep an eye on the future and where your next contract is coming from
  • maintain your network; keep talking to people, keep helping others and keep your eyes and ears open for new problems that need solving in the company you are in
  • try to take a step back and break free from company politics

 

Don’t:

  • be afraid – have confidence in yourself and your ability
  • underestimate the importance of building relationships with the clients you will be working with on a daily basis
  • be shy in making it known that you are achieving your objectives and goals
  • make too many emotional attachments as you might in a permanent role, so that when the inevitable contract change comes around, it is a lot easier to deal with
  • struggle to keep track of time-consuming accounts and complex tax legislation yourself. Appointing a contractor accountant can help make life easier, increase your understanding and provide support and guidance along the way

 

“My advice for anyone considering a career in contracting is to go for it and have confidence – if you are successful as a permanent employee and enjoy meeting people then with the right attitude you will succeed at contracting.” David Martin, Comprehend Solutions Limited

 

Get the right help

One of the perceived barriers to contracting is that people worry about the accounting process. Our client testimonials tell us that by bringing our team of friendly and professional contractor accountants on board, they are free to focus on delivering and growing the business.

 

To find out how we can make your life easier and help you to be a successful contractor, speak to one of our expert contractor accountants today on 01202 375562 or email enquiries@intouchaccounting.com

 

With thanks to the following for their contribution to this article:

Samantha Bell, DML Strategic Communications Ltd.

Paul Davies, Sunny Robot Limited

Alex Paton, Ctrl Cee Limited

David Martin, Comprehend Solutions Limited

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.