Redego clients can significantly reduce the deductions made by the taxman using what is known as a ‘salary exchange’ arrangement. Payroll can transfer funds from your gross contract into the new Redego Group Pension scheme and the taxman won’t receive a penny of this money.

These transfers to the pension scheme represent a key way to ensure that you work as tax efficiently as possible through Redego.

There are no set up costs whatsoever to join the pension and because you reduce not only income tax but also employers and employees National Insurance as well, the Redego scheme is far more effective than any existing arrangements that you may have access to. The rate of deductions saved, even for basic rate taxpayers, is 38% and can be as high as 68% for those who pay the highest rate of income tax.

Joining the scheme couldn’t be easier via telephone, post or email and you can stop contributions at any time without penalties. Should you eventually leave Redego, your fund can either be left invested or you can continue to add to it via a personal investment or via a new employer. Alternatively it can be transferred out to another pension scheme.

In order to bring you this fantastic tax saving opportunity, we are working closely with ContractorFinancials who are Independent Financial Advisers with a unique understanding of the way that you work as a Freelancer. They aim to ensure that you have the knowledge to make the most of your current employment status, helping you to maximise any available tax breaks and avoid any potential pitfalls that you may face.

Pension specialist Andrew Gains explains

“As well as the substantial tax savings to be gained by diverting part of your invoice into the Redego scheme, pension funds held elsewhere can be consolidated within this single scheme and could enjoy potentially far better performance and lower running costs. As independent advisers we can compare schemes for you and we ensure that the new pension scheme provider will levy no charges for accepting such transfers”

Contact Andrew Gains today on 0845 062 8888 or email redego@contractorfinancials.com for further details.

• One large umbrella company – will pay same-day for an extra fee.
• Another large umbrella company – pay ‘same-day’ but on the day after receipt.
• Others – pay by same-day but only on one particular day per week.

Redego pays same-day, every working day (we haven’t missed a day!).

Our customer service promise is to pay contractors’ cleared funds into their bank account on the same-day we receive funds from their agency.

Linkedin has been dubbed ‘Facebook for grown-ups’ and is an online network of more than 8.5 million experienced professionals from around the world representing 130 industries. Its possibilities for job hunting are vast, and a number of Redego’s contractors have secured contracts via this social networking site.

However, for many users, it is a tool that is under-utilised, so we’ve compiled a top-five list of ways to increase the value of LinkedIn.

Increase your visibility.

1. By adding connections, you increase the likelihood that people will see your profile first when they’re searching for someone to hire or do business with. In addition to appearing at the top of search results (which is a major plus if you’re one of the 52,000 product managers on LinkedIn), people would much rather work with people who their friends know and trust.
2. Improve your connectability.
   Most new users put only their current company in their profile. By doing so, they severely limit their ability to connect with people. You should fill out your profile like it’s an executive bio, so include past companies, education, affiliations, and activities.You can also include a link to your profile as part of an email signature. The added benefit is that the link enables people to see all your credentials, which would be awkward if not downright strange, as an attachment.
3. Improve your Google PageRank.
   LinkedIn allows you to make your profile information available for search engines to index. Since LinkedIn profiles receive a fairly high PageRank in Google, this is a good way to influence what people see when they search for you.To do this, create a public profile and select “Full View.” Also, instead of using the default URL, customize your public profile’s URL to be your actual name. To strengthen the visibility of this page in search engines, use this link in various places on the web> For example, when you comment in a blog, include a link to your profile in your signature.
4. Enhance your search engine results.
   In addition to your name, you can also promote your blog or website to search engines like Google and Yahoo! Your LinkedIn profile allows you to publicize websites. There are a few pre-selected categories like “My Website,” “My Company,” etc.If you select “Other” you can modify the name of the link. If you’re linking to your personal blog, include your name or descriptive terms in the link, and voila! instant search-engine optimization for your site. To make this work, be sure your public profile setting is set to “Full View.”
5. Perform blind, “reverse,” and company reference checks.
   LinkedIn’s reference check tool to input a company name and the years the person worked at the company to search for references. Your search will find the people who worked at the company during the same time period. Since references provided by a candidate will generally be glowing, this is a good way to get more balanced data.Companies will typically check your references before hiring you, but have you ever thought of checking your prospective manager’s references? Most interviewees don’t have the audacity to ask a potential boss for references, but with LinkedIn you have a way to scope them out.You can also check up on the company itself by finding the person who used to have the job that you’re interviewing for. Do this by searching for job title and company, but be sure to uncheck “Current titles only.” By contacting people who used to hold the position, you can get the inside scoop on the job, manager and growth potential.

Redego staff Charlie Gregson can be found via LinkedIn.

How does the new allowance work?
ISA’s come in many shapes and sizes; there are cash deposit based accounts or those that invest in a myriad of different assets including stocks and shares, corporate bonds, government debt and property.

You are currently free to invest up to £7200 pa across both ISA types which includes a maximum £3600 in cash but with the new annual subscription limit, over 50’s will soon be able to invest £5,100 in cash and up to £10,200 overall.

Clients need to be aware that you are allowed to open only one cash ISA and one stocks and shares ISA each tax year so if you haven’t already opened one then you can invest up to the new limit. If you have an existing ISA then you may need to take care not to disrupt your existing investment. Some cash ISA providers limit the amount that you can invest in your ISA in a given period of time and if you have already reached that limit then they may not now allow you to take advantage of the new allowance. Some institutions may also decide not to allow their investors the opportunity to benefit from the increased allowance at all but if either scenario applies to you all is not lost.

It is possible to transfer your ISA to another provider to take advantage of the increase, but it is vital that you do not simply close your existing ISA account to open another. Simply closing an existing account without formally transferring your balance in the old ISA will mean that the existing funds are looked on as new money and reinvestment will be counted against your allowance for this year.

This means that if, for example, you have built up a substantial savings pot in your exiting cash ISA of what could be as much as £30,000 and then close this account trying to re-invest in a new cash ISA, you will only be able to receive the tax benefits on £5100 of this money. Instead, you must transfer the balance using an ISA transfer form so that any pre-existing investment remains protected by the tax wrapper.

It is also important to check the terms and conditions that your ISA provider is offering on investment up to the new limit. It may be that a different rate or charges apply to investments over the existing limit of £7,200 and up to the new £10,200 limit and you should be especially wary of this if you have a fixed rate ISA.

How can I best take advantage of the increased allowance?
It’s all about risk versus reward. The cash ISA option carries less risk than a stocks and shares ISA but interest rates on deposits are currently low whilst equities have bounced back very strongly of late.

If you are tempted to invest in stocks and shares but you are put off by the risk then you could consider drip feeding money into your ISA to spread the risk. This is advisable for any form of investment but is especially useful for Stocks and Shares ISA savers as it allows you to minimise the effects of short term fluctuations in the stock market.

The advisers at RedegoFinancials can help you to maximise your investment potential by advising you on the best ISA for your needs. If you decide to opt for a stocks and shares ISA then our adviser will recommend a suitable spread of stocks and shares to suit your attitude to risk and they are on hand to help you transfer your ISA if your current provider won’t allow you to take advantage of the new limit.

Contractor Financials

As a Contractor, you may not have replaced your lost ‘death in service’ benefits that you used to benefit from as a ‘permi’. But when you become a parent the safety net that this cover provides becomes vital to protect your children if the worst should happen.

With this in mind, we can now offer life cover worth £10,000 absolutely free to new parents.

The joy of becoming a parent is often accompanied by an overwhelming feeling of responsibility for your new born. You begin to consider how you will create a safe home environment for your baby and how you will protect it if anything should happen to you. It’s easy to forget the importance of life cover when you get caught up in the excitement of a new baby, but with free cover for new parents it need not be a financial burden. Redego Financials can help you to arrange the cover without any hassle so you have more time to enjoy the important things.

How does the cover work?

Life cover offers an essential safety net to Contractors because if you die then it will pay out a lump sum or an agreed income to cover your families expenses and pay off any debts. At an already traumatic time, life cover offers the peace of mind for your dependents that they are protected financially and prevents them from being liable for any debts you leave behind.

You can insure yourself for a certain period in your life, for example until your children leave home, or you can choose a whole of life policy that will pay out no matter how old you are when you die. The insurance can be inflation proofed to ensure that the amount paid out upon death will be worth the same amount in spending terms as when you decided to take out the policy. This is particularly important for a whole of life policy as £100,000 now would hold a very different value in 30 years time.

The offer of £10,000 free life cover applies to new parents and as such you need to register for the cover before your baby is six months old. The offer applies to both parents and is per child so when you and your partner have a baby you can claim £20,000. If you are lucky enough to have twins then you can claim £40,000 free life cover and so on.

It is possible to take out excess cover on top of your free cover which you will need to pay monthly premiums on. We would advise Contractors to have enough cover in place to pay off any outstanding debts and also provide a safety net for your family to fall back on if the worst should happen. The free cover will end on the child’s first birthday by which time you should be back on your feet financially and able to take on the repayments which will be relatively low on this level of cover. Our advisers will be on hand to help you arrange an affordable cover to suit your individual needs.

Despite the widespread doom and gloom about the economy and unemployment figures rising, new research shows that many of us should actually be feeling better off.

The base rate is so low at the moment and with many household bills also falling this means that the average household has seen disposable incomes rise by around 25% over the last year. According to research by Ernst & Young, those lucky enough to have kept their job during the recession will now have an average of £1,075.22 left over each month which is £200 higher than in 2008.

The same research shows that on average, homeowners are paying 20% less on their mortgage repayments than in 2008 if they are on tracker mortgages or have moved onto their lenders standard variable rate (SVR). Contractors with fixed rate mortgages are unlikely to have seen the same drop in their repayments; however you may be saving in other areas.

Household expenses such as energy, petrol and food costs have fallen by just under 8% in the last 12 months according to Ernst & Young which will have given your disposable income a boost. However, whilst this is great news for the average household we cant get too carried away. The cost of other bills such as council tax, public transport and some insurance products have risen in the last year and falling house prices may mean that your biggest asset, your house, has fallen in value.

What should I do with the extra money?

The economy may still have a long way to go on its route to recovery and whilst it might be tempting to spend your new found wealth on treats for you and your family, this money could be put to much better use in terms of helping you to ensure your future financial security. You might find it beneficial to choose one of the following three options for your extra disposable income:

1. Pay off any debts

It’s easy to accumulate credit card debt and personal loans when you are purchasing because debt enables you to spread the cost over a period of time. However, having large borrowings hanging over you can be stressful, especially if you have a spell between contracts, especially given that unemployment insurance is virtually useless for Contract workers.

There are various perks to paying by credit card and cards often offer incentives to spend. However, it is wise to try and pay off the balance each month in order to stop yourself from paying interest at what will still inevitably be a stubbornly high rate. If you have an outstanding balance on your cards then using your new disposable income to clear some of it off each month will not only be a weight off your mind, it will also help to save you money in interest.

If you don’t want to pay off your debts using your extra disposable income then you could try shopping around for a better deal on the debt that you do have. Switching your existing credit card to a provider that is offering a 0% interest period could save you a substantial amount of money over the course of a year. However, make sure that you won’t have to pay a redemption penalty to your current provider if you pay off the balance early. Some personal loans will incur a penalty charge if you repay the balance before the term is up.

Similarly you need to be aware of handling fees that can sometimes take the fun out of an initial interest free deal.

2. Start saving

Having savings equivalent to three months earnings would offer you peace of mind in case you are in between contracts or if anything should happen. If you were to become ill for example then a savings pot would help bridge the gap before your income protection policy kicks in (indeed by asking for a waiting period before a policy needs to be paying out can significantly reduce the premiums you pay). Without money worries you can concentrate on getting over your accident or illness.

An ISA offers an excellent opportunity for you to save on tax whilst putting your extra disposable income away for a rainy day. These tax free savings accounts allow you to save up to £7,200 each year. You can invest in stocks and shares or you have the option to put up to £3,600 in a cash ISA. If you are over 55 then you can now pay up to £10,200 into an ISA and up to £5,100 into a cash ISA (this will apply to everyone from April 2010). The fact that you can often access your money instantly makes these savings accounts very attractive as you know you can get hold of your money when you need it most but often will benefit from far higher interest rates than can be secured on an ordinary account.

Once you have built up your emergency savings pot, you might want to look at other options for saving your extra disposable income each month. A regular savings plan might be a good way to save your left over cash as you can set up a direct debit from your current account and this is a far less painful way to build up a nest egg than relying on you being disciplined enough to manually pay over a cheque into an investment account.

Buying into a stock market based investment could result in a double whammy – you build a financial safety net but could also be buying at seriously depressed prices with substantial potential for upside.

3. Pay more off your mortgage

You may have seen your mortgage repayments fall due to the low base rate, perhaps because you are now on your lenders SVR or because you hold a tracker mortgage. Check that this is not illusionary because you may still be paying over the odds in relation to the wider market.

If you are paying less you could be enjoying the opportunity to pay off outstanding debts, build up your savings or simply to treat yourself.

However, just as a Contractors most valuable asset is likely to your house, for most it is also your biggest financial commitment. If you were to use this money to pay off a larger chunk of your mortgage debt then you could make a substantial difference to your disposable income in the future. Not only would you decrease your overall debt and therefore next months interest payment, you would also help to minimise the effects that falling house prices may be having on your homes value.

With mortgage lenders increasingly reserving their best rates for low ‘loan to value’ clients. Paying more off the value of your mortgage now may mean you find it easier to remortgage in the future.

Contractor Financials

The new legislation that penalises managed service companies–companies that are run for contractors by providers–has sent a powerful message throughout the industry. There is real concern on the part of agencies and recruiters about the status of the contractors they work with. Are you running your own limited company, or is someone else running it for you? In the latter case, you may have trouble getting more work.

Demand for Repayment Without Notice

Says David Vincent of the London-based Lawspeed, a legal consultancy specialising in contractor affairs: Recruiters and agencies are most likely to be concerned about 3rd Party Liability – tax debt arising from an association with a managed service company which incurs a tax debt that HM Revenue and Customs cannot recover. Recruiters could be liable for managed service company tax debts after 6 January 2008 and the sums involved could be very significant especially where a recruiter or agency has a large number of contractors on their books.”

”If a transfer of debt is activated there is an immediate joint and several liability for the agency or recruiter whether or not a debt notice is served,” Vincent explains. This means that the employment provider could find itself liable for contractor tax debt without even knowing about it! The Revenue will simply appear at the door, as it were, one day and demand repayment.

” Recruiters and agencies are likely to view this as very unfair because it could have a very detrimental effect on the balance sheet and overall value of their businesses.”

Checking on Status

“Recruiters are likely to be more prescriptive in determining whether a worker company is a managed service company, This may add to administration and slow down the sign up process,” Vincent warns.

In other words, your agency or your recruiter will want to be very certain that you are not working in anything that could be even loosely defined as a managed service company. Some agencies have already circulated questionnaires to their contractors asking for definitions of status. But this is probably only the beginning, as further checks will be made, probably extensive ones at the times a contractor is under consideration for a given contract.

Compliance Checks

What Lawspeed expects is that recruiters and agencies will undertake regular compliance checks of their contractors as well. And they will want to ensure that providers register all their limited companies with the Revenue. “They will also undertake spot checks on PAYE slips provided to the worker to ensure payment is full PAYE,” Vincent adds.

What this means in practice is that contractors should know for certain what the status is of the limited companies they are running, and that they should be in a position to prove that status if required to do so. If contractors are unable to prove the independent status of the companies they run, they risk losing contracts.

Contractors need to be very aware of this issue which is unquestionably the hottest topic in the industry today. Ignore it at your peril.

Contractor Calculator

The Intermediaries legislation was introduced on 6th April 2000. It was first proposed by the Chancellor in the 1999 Budget and details were given in the Budget press release numbered IR35. Following extensive consultation, revised proposals were announced in a new press release dated 23 September 1999. However, the legislation is now commonly referred to as ‘IR35’.

The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise -

For tax purposes, be regarded as an employee of the client; and

For NICs purposes, be regarded as employed in employed earner’s employment by the client.

Prior to the introduction of the legislation, an individual could avoid being taxed as an employee on payments for services and paying Class 1 NIC by providing those services through an intermediary. The worker could take the money out of the intermediary, normally a Personal Service Company, in the form of dividends instead of salary. As dividends are not liable to NICs, the use of a dividend remuneration strategy results in the worker paying less in NICs than either a conventional employee or a self-employed person. And PAYE would not apply to the dividends.

The legislation ensures that, if the relationship between the worker and the client would have been one of employment had it not been for an intermediary the worker pays broadly tax and NICs on a basis which is fair in relation to what an employee of the client would pay.

On 6 April 2007 Chapter 9 ITEPA 2003, more commonly known as the Managed Service Company (“MSC”) Legislation, was introduced. The MSC Legislation applies to individuals providing their services through intermediaries which meet the definition of a Managed Service Company.

An intermediary must consider whether the MSC Legislation applies before considering IR35. Intermediaries that do not meet the definition of an MSC must continue to consider IR35.

HMRC

Since ‘A-day’ in 2006, the pension’s simplification rules have allowed Contractors to dramatically reduce their tax bills by contributing a large proportion of their income into a pension scheme. In fact, the only barrier to cap your contributions was the lifetime allowance of £1.75 million and the annual allowance of £245,000 (for 2009/10) and aside from this, it was left to the individual to decide how much to contribute from your annual income.

Using a pension as a route to reduce tax was particularly lucrative for higher earners. The result was that many exploited the freedoms to the full and the 1.5% of top earners received 25% of all pension tax relief last year. However the benefits were not only felt by the UKs millionaire community. Using pensions as a tax planning tool meant that many Contractor clients were pocketing more of their hard earned income than ever before, with some choosing to take a minimal wage or dividend in order to save tax on a all of the rest of their annualised contract income.

The budget rains on the pensions parade

The Budget speech announced that income tax was rising to 50% and this looked set to make pension investment even more of a tax break. The mood was soon dampened by the announcement that the Chancellor would be clamping down on the extent to which pensions could be used for tax relief.

From April 2011, tax relief for Contractors that earn over £180,000 will be capped at the basic rate of 20% and those earning between £150,000 and £180,000 will be judged on a sliding scale of between 40 and 20%.

Whilst the initial reaction from investors and industry professionals alike was to adapt a ‘buy now while stocks last’ mentality, it soon became apparent that the Chancellor was one step ahead of the game. Anti-forestalling rules have been put in place to prevent high earners from maximising contributions over the next two years in order to make use of the tax breaks before they disappear.

‘A-day’ to may day – pensions simplification it is not!

The new restrictions that have been put in place mean that Contractors who have already earned £150,000 or more this year or over the past 2 years, will be restricted to 20% tax relief on pension contributions above a ’special annual allowance’ of only £20,000. Unfortunately, this extends to both employer and employee contributions.

This impacts on your ability to contribute through salary sacrifice arrangements if you operate under an Umbrella company and stops you using unlimited company contributions if you contract via a limited company.

Whilst it is still unclear how the new pensions restrictions will work in practice, any Contractor earning up to £149,999 per year is entitled to invest almost all of it in a pension without incurring income tax, corporation tax, National Insurance deductions or being liable as for benefit in kind. However, if you earn just £1 more than that you are only able to invest up to the special annual allowance of £20,000. It is worth bearing in mind that the £150,000 earnings they are referring to, does not only include salary but also income such as rentals from buy-to-let properties, dividend income and bank interest.

If you invest over this £20,000 limit then you will be subject to a repayment of the balance between the basic and higher rate tax relief that you will gain on this excess investment. This tax relief repayment will probably be via your self-assessment return.

A silver lining for savvy investors

One saving grace is that pre-existing investors who have exceeded the £20,000 limit will still benefit from their current tax relief arrangements as long as they were contributing regularly on a monthly or quarterly basis before April 22nd 2009. These pre-existing regular contributions will be known as ‘protected input amounts’ and so someone that already contributed £3000 per month will be able to continue to contribute that amount and benefit from 40% tax relief.

For those savvy pension investors, keeping up regular contributions will be crucial in order to continue receiving the tax relief benefits that you currently enjoy. Any investment that exceeds the special annual allowance of £20,000 and your individual ‘protected input amount’ will be charged at a rate of 20% this year and 30% in 2010.

Unfortunately for those contractors that employ a more ad hoc approach to pension investment, this pre-existing contribution bonus does not apply. Investors that prefer to invest via a lump sum at the end of the tax year will therefore fall foul of the new rules.

Missed the boat? There may be another route

If you are in the fortunate position of narrowly missing the £150,000 earnings cap, then now is the perfect time to maximise contributions in case of any further increase in earnings or new rules coming into play. The most effective way of contributing is likely to be through regular investments on a monthly or quarterly basis as we have already seen various concessions being made for regular contributors and this could lead to further savings in the future.

If your earnings exceed the £150,000 limit then it is arguably more important than ever to invest up to the £20,000 special allowance in order to exploit one of the few remaining tax breaks for Contractors. If you invest the full £20,000 then the tax man is effectively paying £8,000 which is a worthwhile return on your investment and with savings rates at an all time low, it might represent the best place to invest in the current climate.

Also if you earned over £150k last tax year but wont do so this year there is a way to reduce your income back down under the threshold using a Gift Aid donation for 2008/9.

With concerns growing over the future of state pensions due to the shrinking workforce and increasing longevity, the emphasis is on personal investment to provide for your retirement. It is therefore highly unlikely that the Government will abolish higher rate tax relief altogether and if anything, the higher taxes announced in the budget provides an even greater incentive for Contractors to make regular contributions towards their future.

Contractor Financials