Beginner’s Guide to Contracting
Contracting is an extremely rewarding life choice. Although being self-employed means that you have a lot more responsibility than a permanent worker, the benefits far outweigh any negatives and with the help and advice of professionals, such as contractor accountants, it will be a decision you’ll never regret!
Becoming a contractor means that you will have an increased amount of freedom and flexibility, as you will essentially be your own boss. You will also be able to take advantage of the financial benefits, such as setting your own rates and claiming your business expenses against your income to further reduce your tax bill.
When you have decided that you want to join the exciting world of contracting, there are a few steps that you will need to take in order to start this journey:
To become a successful contractor, you will need to actively seek out your own work. This is where working for yourself requires a lot of perseverance and motivation…
Here are some useful tips for finding work:
• Look on specialist contractor websites – news feeds from these types of websites are a great method for finding all the current jobs, as well as finding out how your particular industry is developing.
• Jobsites – post your CV on as many jobsites as possible, focusing on more niche sites so you know that the right person will be viewing it.
• Social media –Look out for local networking groups or industry-specific events that could generate more interest in your work. Social networking sites such as Facebook, Twitter and LinkedIn are an effective source for freelancers and are a free way of advertising your business.
• Contacts – Building up a portfolio of contacts that you have met along the way is a great idea; this is especially useful if they can perhaps offer you a role in your chosen field. Don’t be afraid to contact them directly and send them your CV.
Umbrella or Limited?
When you become a contractor, you will need to decide whether you want to work through an umbrella company or form your own limited company.
For most people, going limited is the best option as it is the most tax efficient way of working, also, trading through your own limited company will see you with a 75%-80% take home pay. By working through an umbrella company you could take home around 60%-65% of your contract value.
However, there is usually one in particular that will suit you and your needs best. For example, if you are expecting to contract for less than three months or earn less than £25,000 then it may be worth reconsidering the limited company route.
Appoint a contractor accountant
It’s always best to take on an accountant who specialises in working with contractors so that they will be able to offer you the best advice when it comes to your working practices.
You can get great limited company accountancy advice from a contractor accountant, including issues such as IR35, contractor tax, setting up a separate bank account if you’re forming your own limited company and how to register for VAT and the Flat Rate VAT Scheme.