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Moving from permanent to contract often means a higher take-home pay, which is only fair considering the benefits contractors have to give up. Whatever your reasons for moving from permanent to self-employment, there are some key considerations to make before committing. This step-by-step guide will tell you how to find contract roles, what to look for in a contract, as well as giving details on the various ways to operate – i.e. how to actually take home an income from your contract.
The demand for contractors, freelancers, interim managers and consultants will always be high. Corporates and even government agencies are turning to this highly-skilled and mobile workforce to perform tasks and manage projects. Contractors and interim managers offer far more flexibility and are a lower long-term cost option, compared to taking on permanent members of staff.
Finding a contract is really no different to changing jobs. You’ll need to make sure your CV is fully updated and then target recruitment agencies which specialise in your particular field.
Click the following link to review our comprehensive comparison table which indicates the differences between working through your own limited company or through an umbrella company.
IR35 will play a part in determining which structure will be most beneficial to you. If you are outside IR35 and intend to be contracting for over three months, you will benefit from the tax planning opportunities related to working through a limited company. This simply means you will be responsible for a slightly higher amount of monthly administration (our contractor clients spend an average of 15-20 minutes per month on this) when compared to working under an umbrella company.
Working under an umbrella company means less take-home pay, but as an employee of the umbrella company – IR35 does not have any bearing on you. If you are outside IR35, you are not obliged to operate under an umbrella; it remains your choice.
In summary, choosing a limited company structure means a higher take home and increased administration, while choosing to work under an umbrella affects your bottom line, but removes the need to consider IR35.
Many contractors are choosing a blended approach when it comes to business structure to remain flexible regardless of an assignment’s IR35 status. With the majority of our packages, we provide margin free umbrella employment as standard, meaning you can seamlessly switch between limited and umbrella with no need to change your accountant.
IR35 was launched by the government in order to stop staff moving from permanent to contract in the same company. This move saw 'contractors' retaining the same benefits, risks and working practices as an employee, as well as being able to take advantage of the tax reliefs and benefits of working through their own limited companies.
Providing you take the necessary precautions (such as ensuring that you meet all of the conditions in your contract) required to stay outside of IR35, and your working practices reflect the contract, you have very little to worry about.
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Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.