How to Become a Contractor

Making the move to contracting can be a daunting time and finding clear advice often proves to be a challenge. That’s why we have created a guide explaining all of the steps you need to take to become a contractor.

Becoming a contractor takes a lot of research

This is the first and most important step. Before you begin, you should answer the following questions:

  1. Is contracting right for you and your circumstances?
  2. Is there a demand for contractors in your field?
  3. Will you be able to make money from contracting?
  4. Do you have the discipline and resilience to actively seek out contracts?
  5. Do you understand how IR35 will affect you as a contractor?

Finding contract work

Build an award-winning CV

In order to maximise your chances of finding work, especially in the early days, there are a number of steps you can take:

Your CV will often be one of the first impressions a potential client has of you. It is therefore important to ensure that your CV reflects you as well as possible. You should outline your previous experience and any skills you believe would make you stand out from the crowd.

Be prepared at interviews

Preparing for an interview will maximise your chances of securing your new contract. You can follow our guide Interview Strategies for tips.

Decide whether to go limited or umbrella

There are two ways in which you can operate as a contractor: under an umbrella company, or through your own limited company. Both routes have their unique benefits and drawbacks - so the best route for you will depend on your unique circumstances.

Some of the common advantages and disadvantages between limited or umbrella include:

Limited Company PAYE Umbrella
Advantages The most tax efficient way of working Very easy to use - simply enter your timesheet and expense details and wait to be paid
Claim a wider range of expenses All tax and NI is deducted at source, so you will have no further taxes to pay
Access to the Flat Rate VAT Scheme Ideal for short-term contracts
You keep complete control of your financial affairs Ideal for contracts less than £25k per year
Greater opportunity for tax planning Someone else will be doing the paperwork
Disadvantages You will have to complete your own paperwork The more expensive way of working - you will receive a salary that is subject to full PAYE Tax and NI
Can be costly if you contract for a short period of time and then return to permanent employment You are reliant on the umbrella company to pay you
Not ideal for contracts less than £25k per year You have no control over your contracting finances (for example, dividends)

Take home pay

The amount you could earn is one of the biggest factors for contractors when deciding which route they should take. Although limited company contractors generally earn more, a greater level of responsibility falls to you.

You can find a detailed summary of the earnings you could expect depending on whether you choose the limited or umbrella option.

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How can SJD Accountancy help?


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