Top Questions Answered for First Time Contractors

From the outset of the New Year, we’ve seen many professionals are contemplating a shift toward contracting, enticed by the benefits of flexibility, independence, and potential financial benefits. In this blog post, we focus on addressing the most common queries from first-time contractors. Whether you're on the brink of making the leap or just curious about the process, learn about the contracting process now.

  • Contracting info

How does Contracting differ from permanent employment?

What sets contracting apart from permanent employment is the engagement in providing consulting services to a business through a contractual agreement governed by Corporate Law. Instead of being an employee of a specific company, contractors operate as independent consultants. In contrast to the fixed salary structure of permanent employment, contractors receive a daily rate, encompassing holiday and sick pay entitlements. This approach often results in a higher pay rate for contractors, reflecting these added benefits. Additionally, contractors can leverage advantages, such as claiming expenses and paying Class S PRSI.

How do I set up as a Contractor?

Before you start to contract, you must determine the best limited company solution for your needs. You can choose between an Umbrella Company for immediate setup or a Personal Limited Company for more control, ideal for long-term contracts. Our expert team have guided thousands of first-time contractors decide on solutions that suit them best and can help you today if you get in touch!

How long does it take to get set-up as a contractor?

Both umbrella company solutions offer immediate setup, while a Personal Limited Company may take several weeks due to the incorporation and tax registration processes.

What company solution suits me best for my new contract role?

Choosing the right company setup for your contract work is a crucial decision that impacts various aspects of your career and future. By considering factors such as the contract details, expenses, tax implications along with your own personal development and career growth plans, you are set to make an informed choice on your contracting future!

If this is your first time contracting, the umbrella company is usually the most fitting solution. This will give you the ability to set- up immediately, plus there is no sign up or leaving charges and insurance is included at no extra cost.

Alternatively, the Personal Limited Companies are suitable for those considering long-term contracting or with specific business goals. This would be best if you have high value or volume of expenses, or for those contractors that are interested in purchasing assets such as a company car, are looking to employ others or looking to build company reserves.

Do I need to do anything to my bank account or do I need to set-up a business bank account?

With our umbrella company solutions, you do not need to set-up a business bank account and can use a current account to receive your net payment. After we manage all tax deductions on your behalf, we will transfer the net income to your personal account.

When operating through a Personal Limited Company solution, unlike the umbrella companies, there is a requirement to open a business bank account. This can be completed after your company is incorporated.

Do I need to register anything with Revenue?

For an Umbrella Company, no registration is necessary. Your dedicated account manager at Icon Accounting will be able to complete all registrations for payroll purposes on your behalf.

With a Personal Limited Company, you'll need to apply for VAT registration after incorporation, which can be managed by your dedicated account manager at Icon Accounting too!

What will be my take home pay as a contractor? How does contracting impact the tax I pay?

Your take-home pay depends on your company structure and tax planning. You can use our free online tax calculator to get an estimate of your net take home pay for all solutions.

We always suggest consulting with our contractor advisors first to understand how your choice may impact your tax obligations and potential savings.

With our PAYE Umbrella Company solution, you will pay Class A PRSI. With our Director Umbrella solution, you will pay Class S PRSI on payroll processed and with our Personal Limited Company, you will similarly pay Class S PRSI, but will have flexibility on how you company funds are processed.

What are business expenses and what is the process to claim them?

In a nutshell, costs that are incurred wholly and exclusively for your business or contract work can be claimed as business expenses, which means that you’ll receive tax relief on the costs. Our expert team provide a bespoke assessment of each Contractor’s individual circumstances with a view to saving them as much money as possible. You can claim tax relief on expenses like equipment, bills, relocation, training, and more.

To claim, it’s also a simple process! Just log on to your Icon Accounting portal or app, add any business expenses you require and upload the necessary receipts. Once everything is in order, your Payroll Account Manager will be able to approve your request. You will be provided this tax relief on the following payslips you receive.

When and how do I get paid?

Your payment date will depend on the schedule in place with your recruitment agency or end client. But Icon Accounting guarantees the same day processing of payments! Once funds are received from your recruitment agency or end term client, we will immediately process your payroll and transfer the funds to your bank account.

To get paid, all you are required to do is submit your time worked along with timesheets with necessary on the Icon Accounting App or Portal. From this, we can generate all invoices on your behalf to request payment.

Is there a minimum period I must stay operating as a contractor?

No, there's no minimum timeframe for operating as a contractor under company solutions. However, consider the setup and closing processes involved in a Personal Limited Company.

What happens when my contract finishes?

After the final payment from your agency, Icon Accounting informs Revenue of your contract cessation, updating your myaccount.

Author

Shauna McEntee

Marketing

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