Are you wondering how to become a contractor here in the UK? As a common rule, it is important to put your expertise or skill to good use. Changing your career to become your own boss can be intimidating but it offers many benefits in terms of flexible working hours, increased revenue and professional autonomy.

Apart from having an effective business plan in place, there are other essentials to look at before becoming a contractor.  If you’ve made the decision to hit the road into contracting, here is your simple 5-step guide to help you make the leap.

1. Valuate and understand the demand:

Before you even think about becoming a contractor, find out your core skill and valuate if there’s enough demand for your skill in the market (research). As we all know, there is always less demand for generalized skill and more demand for specialization. For example in medicine, expertise in a specific area such as cardiology or nephrology has more demand than generalized practice.

Secondly, your contract rate depends on the skills and years of experience you’ve in your domain. If there’s less demand for your core skill-set in the market or you’ve not been in the industry for very long then you might want to wait and develop yourself professionally before jumping headlong.

2. Time it right and be prepared for the change:

Once you understand the demand for your core expertise, you’ll have to be prepared to leave your current role. The nature of contracting industry means that clients will want contractors to start-off immediately or at least within two weeks. It is not necessary that you’ve to be unemployed while you search for your first contract but you should be ready to grab great opportunities as they arise – or someone else will. Hence you should time it right so that you can serve your current employer’s notice and step successfully into your end client’s task on their desired date.

3. Secure your first contract:

To secure your first contract simply sign up with recruitment agencies as they’re involved in identifying/placing contractors into specific roles. The contract industry is fueled by recruitment agencies so the easiest way to make yourself visible is by registering with several agencies. Some agencies specialize in specific job sectors, all you’ve to do is just identify and register with them to get your first contract much quicker.

You can find new jobs through a reference from your past/existing clients or from colleagues. Additionally, you can grow your professional network by uploading your CV on various job portals. You can also update your social media profiles (Linkedin, FB or Twitter) about your aspiration to become a contractor.

4. Understand the IR35 status:

IR35 is legislation designed to prevent workers from fraudulently claiming to be contractors for the sake of additional tax benefits. It’s very important to get grips with IR35 and its guidelines in order to develop yourself as a successful contractor.

If you are inside IR35 then you’ll have to pay income tax and NI as other regular employees. On the other hand, if you’re outside IR35 then you’re deemed as self-employed and get to enjoy the tax benefits. Your IR35 status varies from contract to contract as it depends on your working sector.

Regardless, you should be aware of it in case if HMRC ever questions you about your stand or if you’ve to appeal an end client’s decision. We recommend you to seek professional advice because understanding IR35 requires knowledge of payment case law. You can also get in touch with us to talk to our accountant for a free consultation.

5. Decide on company structure and payroll service:

Typically there are two methods for contractors to be paid: (1) an umbrella company or/and (2) a limited company

Contractors who are contracting on a short-term basis often use umbrella companies for their payroll. Also, contractors who do not want to involve with paperwork or administration choose umbrella companies.

Contractors who are looking for a long-term business go with the second option. Additionally choosing a limited company for payroll services yields a higher take-home pay and offers more tax planning options than that of an umbrella company. Limited company directors can also claim certain expense that is not possible via an umbrella company.

The bottom-line:

Once you start your first contract, make sure to submit all the relevant timesheets, mileage and expenses to your accountant. Make sure to complete other relevant monthly, quarterly and yearly accounting administration to be compliant and for continued success.

Many permanent employees are making the switch to contracting as it offers various opportunities for career advancement. It also gives more benefits as the industry is in demand for skilled resources in IT, marketing and other technical roles to name a few.

At Mint we understand our client’s priorities and make them feel accomplished by fulfilling their professional dreams.

Are you desirous of becoming a contractor and not quite sure how to start?

As always, we are here to assist and help you explore your contracting career. Call us today to establish a flourishing career as a contractor.

 

Want to register your UK limited company today?


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