Starting up guide for contractors

When thinking about setting up on your own it can seem a little daunting. Perhaps you have decided that you are fed up of working for someone else and want to be your own boss, or maybe you are in between jobs and are thinking of giving contracting a go. Whatever your reason you have come to the right place. This article will tell you everything you need to know about contracting as well as some useful tips to get you started.

What is contracting?

As a contractor, you will be self-employed or working through your own limited company and will only be contracting for a client for a limited time period. In contrast to being an employee of a specific company, as a contractor, you will be in control of the number of hours you work and how much you should get paid. Essentially, you are your own boss and many individuals turn to contract work to give them the flexibility they desire in life while also putting their skills and experience to good use.

How and why to become a contractor

If you are thinking of becoming a contractor a good place to start would be to speak to one of our contractor accountants. We specialise in contractor accounting and can offer you the chance to discuss your ideas with a contractor specialist who can give you tips on how to get started. This will include discussing whether it would be more beneficial for you to set up as a contractor under an umbrella company or on your own as a limited company.

There are several perks to becoming a contractor which is why many individuals select this route if they are seeking an alternative to full-time employment. Contractors are often paid at a higher rate than employed staff and have the benefit of selecting the projects they work on rather than this being decided by a manager. As a contractor, you can also be in full control of your time – deciding what hours you work and the holidays you take.

There are also tax benefits that come with becoming a contractor, which our contractor accountants can help you to take full advantage of. You will be able to claim on a range of expenses helping to bring your tax bill down with a contractor specialist on board.

Beware of IR35

IR35 is a piece of tax legislation that aims to prevent contractors from working as ‘disguised employees. This is where a person is registered as a contractor (so is self-employed) but works as if they are an employee of the company and receive the same benefits as employed staff (such as holiday pay, sick pay etc.). You can declare that you are ‘inside’ IR35 if you find yourself in this situation, however, not declaring it can incur a large penalty and tax bill from HMRC.

To help you navigate the IR35 try speaking to our team of contractor accountants in London. Our team of IR35 specialists in London will be able to assist you in making sure your work contracts and working practices adhere to IR35 and provide advice on what to do if they don’t. Getting the IR35 right is a key part of contractor accounting which is why our expert contract accountants are the perfect fit if you are thinking of becoming a contractor in the UK.

Different ways of working as a contractor

There are different ways of working as a contractor and when you first take a look at these it can be a little confusing. Thanks to our in-house contractor accountants and contractor specialists there will be someone to explain your options clearly, and to offer advice on what would be the best way of working, for you. Here we explain all of your options.

Limited Company

One way of setting up as a contractor is by starting a limited company. Our team of contractor accountants in London can help you to do this. This is a popular option for contractors as it gives the most control and can be the most sensible choice when it comes to tax.

The potential downside with setting up a limited company is that you will have greater responsibility. This means that you will be in charge of the accounts, taking care of invoices and expenses and filling out your tax return. Having a team of contractor accountants in London behind you, which includes IR35 specialists in London as well, will help reduce this burden and ensure your responsibility is shared.

Umbrella Company

If you are wanting to become a contractor but would like the option with the least administrative responsibility, then opting to work as a contractor under an umbrella company might be the best choice for you. In this scenario, your employer will sort out your income tax and national insurance which means you don’t need to worry about those aspects of your finances.

In this situation, you will still be able to control your own workload but also have the benefits of a permanent employee. Our contractor accountants will help you to decide if this is the best option for you.

Expenses you can claim as a contractor working through your limited company

As contractor accounting experts we can advise you accurately on whether or not you fall outside of IR35 and what expenses you can claim if you do fall into this category. This means you can claim expenses that relate to your business such as travel, utility bills, insurance, accountancy fees, internet costs, and phone bills.

10 key things you should know before you start contracting

1. Earn more money – contractors are often paid at higher rates than permanent employees.
2. Be your own boss – contracting means that you get to call the shots.
3. Choose the hours you work – as a contractor you have the freedom to select when you work, and the number of hours you want to work.
4. Select the projects that interest you – as you are now in charge you can select which projects you work on, selecting areas that fuel your interest and allow you to develop your skills.
5. Claim tax benefits – if you go down the limited company route you can claim expenses against your income which will help to reduce your overall tax bill.
6. Have the best of both worlds – if going at it completely on your own sounds too big a step you can become a contractor under an umbrella company. This gives you the freedom to work independently while having your tax and national insurance contributions taken care of.
7. Employee benefits are taken away – if you set up as a limited company (and don’t go down the umbrella company route) you will lose the security of employee benefits such as holiday, maternity and sick pay. Something that is worth considering before you make your decision.
8. IR35 legislation – the IR35 legislation is in place to make sure contractors are paying tax correctly. Don’t let this legislation catch you out and speak to our IR35 specialists London about how this affects you.
9. Contractor accountants London – getting the best contractor accountants London to take care of your affairs will ensure you can share the responsibility of taking on a limited company yourself. Contractor accounting is our speciality.
10. Contractor UK – being a contractor in the UK can be a very smart choice to ensure that you are getting the best financial reward for your time and your skills. It is also a great option if you are looking to have more independence in your working life.

If contracting sounds like an appealing career move give us a call today and we can offer expert advice to help you decide your next steps.

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