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This is the second of a two part article, read the first article: Functions that can be outsourced by a Limited Company: Part 1
The number of Limited Company contractors is increasing steadily in the UK. This has led to the development of an entire ecosystem of services targeted towards contractors or freelancers. As part of the 'Path of Education for New Contractors,' in an earlier article we looked at some of the legal and accounting functions that can be outsourced by Limited Company contractors. As a follow-up to the previous article, we look at some more services that can be outsourced by Limited Company contractors.
As a Limited Company contractor, you will often find it challenging to secure a mortgage. Many times, contractors are rejected by the front-line staff of high-street lenders as such staff is trained to deal only with permanent or full-time employees. For example, the front-line staff may not be aware that you are paying yourself a lower salary, but your overall income is much higher, and they may straightaway reject your mortgage application.
At other times, a mortgage advisor may process your application, run a credit score, and even offer an agreement in principle. Based on this positive response, you will start shortlisting new properties, and even make an offer for one of the properties, only to realize that the underwriter at the mortgage lender's firm has rejected your application.
To avoid these challenges, contractors can outsource the job of finding a new mortgage to any of the several contractor mortgage specialists. Typically, these specialists or brokers don't deal with front-line staff; instead they directly deal with the underwriters. Some contractor mortgage specialists can provide you mortgages of up to 5 times your annualised income, based on your signed contracts. Some may even offer mortgages to contractors who have just begun contracting and do not have a proven track record of revenues. And some providers will provide you with a good mortgage deal for free, because they make their money through the lenders.
For most Limited Company contractors, pensions are a very attractive investment option. Pensions provide significant tax savings and also serve as a source of retirement income. However, given the wide variety of options available in the market, contractors find it difficult to choose a suitable pension provider. For example, some pension providers charge high initial set up costs, and it is best to stay away from them.
Along with selecting a pension provider, you also need to decide whether to invest in an equity-based, debt-based or any other type of pension fund. You will find many pension advisors in the market, who can advise you on the most appropriate pension plan based on your financial situation and objectives.
Limited Companies have to take several types of insurance, such as professional indemnity insurance, Directors and Officers (D&O) liability insurance, public liability insurance, office insurance, etc. Apart from taking insurance for the company, Directors also have to take different types of insurance for themselves, such as income protection, critical illness cover, life insurance, etc.
There are several factors involved in choosing the correct insurance provider for different types of insurance. Let's take income protection cover as an example.
This is only one example. Each type of insurance cover has its own set of technicalities, which are difficult to understand for most contractors, especially those who have taken up contracting only recently.
You will find many insurance brokers providing insurance specifically for Limited Company contractors. Choosing the correct insurance broker can help you in getting better insurance deals.
As per a 2011 survey, nearly 51 percent of British adults have not created a will. While a will is important for everyone, a will plays an important role for Limited Company contractors as some of them may have large amounts saved in pensions or ISAs for saving taxes. In the event of the death of the contractor, the family has to run around to get access to their investments if there is no will.
Apart from investments, a Limited Company director may also have other assets such as bank balance, office equipment, and other professional equipment, among others. A professionally drafted will can make it a lot easier for the families of the deceased contractors to get access to all the assets and investments left behind by them. You will find many service providers who can write a professional will for you.
New or experienced, most contractors find it difficult to negotiate rates with their clients. Often many contractors are anxious to know what rates are charged by other contractors with similar skills. Some contractors may feel they are underpaid in terms of market rates for similar work, but they fear losing the client by quoting too high a price. You can use the services of professionals who can help you with negotiation of fees for both your existing and new contracts. You may not realize, but even a small increase in rates of 5-10% will make a significant difference to your annual income.
A bank account plays a major role in the functioning of a Limited Company. You need to consider several factors before choosing a bank account, such as interest rates, quality of service, transaction charges, add-ons like mobile or internet banking, and so on. Many new contractors don't have the time to do research before opening a bank account for their Limited Company. Some new contractors open an account with the same bank where they are holding a personal bank account. This may not be a good idea because a business account is very different from a personal account. For example, a business bank account will have many extra charges as compared to a personal bank account.
You can outsource opening of a bank account to a professional. They can get you good interest rates, and also help you get better deals for transaction and other charges.
Contractors require a range of internet marketing services such as website development, web content writing, search engine optimization, email marketing, and social media management. If you are a new contractor, you will also need a new logo for display on your website and other marketing stationery. Unless you are from the same field, you will have to outsource these functions to a professional digital marketing agency. A good internet marketing partner can make a big difference to your brand.
Some of the functions listed above are quite simple, but the real challenge is to find good deals in the market. For example, anybody can open a bank account on their own, but they may not get the best interest rate. On the other hand, if contractors use the services of professionals who are dealing with these services on a full-time basis and who have the right connections, they can more profitable terms rather than them going alone to say a bank or a mortgage provider.
You may also find the following contractor calculators useful for your salary and tax calculations.