Are you thinking of becoming a contractor? Deciding on a career change is always challenging, and switching from permanent employment to contracting can seem intimidating. However, contracting can offer many benefits such as an increased earning potential, flexible working hours, job autonomy, and much more.
If you are thinking of becoming a contractor and are not quite sure how to start, we can help you make the first steps to starting a rewarding career in contracting. Continue reading to find out more.
1. Sign up with recruitment agencies
The contracting industry is largely fuelled by recruitment agencies who are good at placing skilled contractors into roles quickly and efficiently. Therefore, the easiest way to put yourself out there as a first-time contractor is to register with several recruitment agencies. Many agencies also specialise in specific job sectors, so registering with a specialist agency could help you find your first contract role quicker.
Alternatively, you have the option to find contract roles directly through end clients. This is sometimes difficult for a first-time contractor who may not have a large network of contacts, but you can start growing your network by keeping in touch with previous and current colleagues, putting your CV on contractor job sites, and updating your LinkedIn profile to reflect your career plans.
2. Be prepared to leave your permanent role
You do not necessarily need to be unemployed while searching for your first contract role, but keep in mind that the majority of potential clients will want to interview candidates immediately and, in many cases, require you to start within a couple of weeks. Sometimes this is not the case, but it’s important to be aware of the fast-paced nature of the contractor industry, and to be prepared to take contract opportunities as they arise.
3. Decide on a payroll service – limited vs. umbrella
Even if you have not yet secured your first contract, it’s important to decide how you will be paid as a contractor early on. There are typically two methods for contractors to be paid: via an umbrella company or via a limited company. Contractors who do not want to be involved with administration or paperwork or are contracting for the short term often use umbrella companies for their payroll.
A limited company, on the other hand, is beneficial in that it can yield a higher take home pay than an umbrella company by allowing the Director to take a low salary and distribute dividends. Limited company Directors are also able to claim certain expenses not available through an umbrella company.
For those worried about the hassle of completing paperwork, there are professional contractor accountants in the UK who can handle the majority of limited company administration to make running a contractor business as hassle free as possible.
Find out more on choosing between Limited company or Umbrella.
Whether you choose to operate via an umbrella company or a limited company, Churchill Knight & Associates Ltd, a contractor accountancy firm in London, can assist you with starting your contractor career and setting you up with the payroll service that’s best for you. We can either help you set up under the umbrella company option, or help you set up and run a limited company with our bespoke accountancy service.
Even if you’re yet to secure your first contract, we can still set up your limited company so you are ready to start being paid as soon as you start your first contract role.
4. Get started in your new role
Once you have secured your first contract and have set up your payroll service, you’re almost ready to start contracting. But first, it’s important to consider whether your contract places you inside or outside IR35 legislation. IR35 is a piece of government legislation that helps determine whether a contractor is genuinely self-employed.
To find out your tax status regarding IR35 legislation, or to get assistance with negotiating the terms of your contract, you should contact a tax status specialist such as Bauer & Cottrell.
Your agency will liaise between you and your end client to finalise and sign your contract so you can get started in your new role. When you start your contract, make sure you submit all relevant time sheets, expenses and mileage to your accountancy service provider as required, and complete relevant monthly, quarterly and yearly administration through your contractor accountant.
Becoming a contractor can give you a higher take home pay, more opportunity for career advancement, and higher flexibility and freedom in your career. Many permanent employees are making the switch to contracting, especially as the industry is in demand for skilled professionals for IT, Finance, and technical Marketing roles, to name a few. This gives you the opportunity to reach a higher salary level as a contractor than as a permanent employee. Furthermore, becoming a contractor allows you to expand your professional experience by working in a variety of roles.
More about running your own limited company
Having your own limited company not only helps you maximise your take home pay, but it also provides you with more security and control over your finances. Many contractors are opting to set up their own limited company as it has proved to be a more financially rewarding payroll option.
If you choose to set up your own limited company, Churchill Knight can assist you with the following:
- Setting up your limited company at no cost
- Setting up your business bank account
- Registering your limited company for VAT
- Registering your limited company for the VAT Flat Rate Scheme (optional)
- Registering your company for PAYE and National Insurance contributions
- Completing your company’s quarterly VAT Returns
- Submitting timesheets, expenses and mileage
- Completing your limited company’s Annual Return
- Providing you with unlimited free support and advice
Our contractor accountancy service is bespoke, and we have been helping contractors in the UK since 1998, which makes us experts in the contracting industry. We can also help you navigate any changes to tax legislation that arise, so you can continue to maximise your take home pay.
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