A Beginners Guide to Daily Rate Contracting

There is no arguing that daily rate contracting can offer the opportunity to earn good money. However, the problem is that contracting is often talked about more than it is explained, making it sometimes seem as a confusing or even daunting process! If you are a considering daily rate contracting for the first time, you can learn exactly what options are available to you to set up, how it works, and what taxes you pay with our help.

What is Daily Rate Contracting? The best way to understand Daily Rate Contracting is to think it as you providing a service to a client. You set a fixed rate of pay per day worked and are paid for those days worked. When people decide to contract, they generally agree the duration of time for which their service is required.

How do I set up as a Daily Rate Contractor? As a Daily Rate Contractor you will most likely require a Limited Company structure to start contracting. A Limited Company has a separate legal existence protecting you from any personal liability in the event of work damage or defects. This can take the form of a Personal Limited Company or as an Umbrella Company. The majority of first time contractors will set up under an ‘Umbrella Company’. An Umbrella Company is a company which is fully incorporated, registered for tax and is typically covered by insurance. This allows a contractor access to an immediate set up without having to set up a Personal Limited Company under their own individual name. However established contractors, for the most part, operate under their own Personal Limited Company rather than an Umbrella Company as it often proves to be the most tax efficient way while contracting long term.

How does Daily Rate Contracting work? Daily Rate Contracting generally involves submitting an invoice to your agency or client at the end of each billing period. Under an Umbrella Company, invoicing and payment services typically go hand – in – hand, meaning all your invoicing and payment responsibilities are taken care of by your Umbrella Company service provider. Once funds are processed, payment can be sent to a personal bank account alongside your payslip.

How much tax will I pay as Daily Rate Contractor? Although some of us may fantasize about retaining full salaries in our back pockets, contracting can't help us escape the hard reality of paying tax! A number of factors will impact the amount of tax which you will pay as a Daily Rate Contractor, including status; single/married, Personal Tax Credits and Allowable Business Expenses. To view an estimation of how much tax you will pay as a Daily Rate Contractor, check out our online tax calculator http://www.iconaccounting.ie/tax-calculator/

If you are considering contracting for the first time, please contact our team for a free pre – contracting information pack, tailored advice and sample payslips – 01 8077106

Claire Fagan 17th November 2014