Venture Into The Wonderful World Of Contracting

Stepping into the world of contracting can be daunting, exciting and scary.

You have decided that you’ve had enough of being employed by somebody else only to see a huge chunk of your earnings making their way to the tax man. Your contracting colleagues are encouraging you to go for it, to relinquish the security of permanent employment and to become your own boss. The financial rewards are plentiful, but there is always something niggling at the back of your mind preventing you from taking the plunge. The onus is now on you to sort out all of your financial affairs from PAYE to VAT and from corporation tax to indemnity insurance. The task to set yourself up ready to become a contractor can seem huge, but it can be done. In fact, thousands of people across the UK are enjoying the freedom of setting up their own limited companies and contracting. Could it be time that you did the same?

On Your Own

As a contractor, you are branching out on your own using your IT, business or technical knowledge to work with companies for a set length of time to complete a specific project. Once the project is completed, you then move on to the next company. The work is varied, and the financial gain can be phenomenal, earning up to £800 a day. But how do you manage this money on your own? It’s vital that you source an accountant that specialises in working with contractors. These people understand the intricacies of financial regulations and are always clued up on the latest legislation. These specialist accountants will help you to set up your limited company and sort out your taxes, VAT and set up your company bank account.

If you choose to go it alone and use Google as your only source of information when venturing down the path to contracting, you may be in for some nasty surprises. Put bluntly, you are risking too much professionally and personally. Even though it may be a novice mistake, if you don’t pay your VAT on time or don’t pay up enough for your corporation tax, this may be a red flag to the HMRC, and you may find yourself under a tax investigation. At this point, you will need the help of a specialist tax firm that can represent you and defend your position to resolve any tax disputes. An investigation into any part of your business is stressful, can affect your health and prevent you from working, so it’s vital to get the professionals on board.

The list of tasks that you need to do before you begin to contract can be bewildering. You’ll need insurances, a company bank account, a registered business address, and you need access to some intuitive and accurate accounting software. Many of these tasks can be fulfilled by an accountant for a monthly fee. Others do require some research on your part, and if you scout out the right deal, you can further enhance the financial benefits of contracting.

You may have heard the phrase IR35 bandied about when it comes to contracting. This is the UK government’s fine line between applying a tax status to a role that constitutes a full-time employee or a contractor. This is where your specialist accountant will earn his or her fees. They will ensure that you never fall into the trap of working with a company on a contracting basis only to find that your contract does not fulfil the IR35 criteria. You don’t want to find yourself being taxed as a full-time employee and not enjoying the financial benefits that contracting brings with it.

Contracting is a Mindset

Get it right and contracting can be relatively stress-free and can see you develop an exceptional CV. Contracting is a mindset. There will be times when you are out of work or ‘on the bench’ but this could be time that you spend gaining another qualification, doing some voluntary work or travelling. Many contractors find themselves falling into a routine of working nine months of the year, with three months spent doing other things such as hobbies or spending time with family. The world of contracting offers a great deal of flexibility and freedom. However, some people thrive on routine and stability. You’ll never know until you try. If you find that contracting isn’t for you and that you prefer the security of a permanent role, you can always slip back into the world of full-time employment. Do your research and look into the contracting job market where you are based in the UK. If it is currently buoyant, there may never be a better time to dip your toes into the wonderful world of contracting.