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Higher rates of pay, flexible working hours and the ability to choose which projects you work on. There are many reasons why you may be considering making the move from permanent employment to contracting. As this may initially seem a daunting prospect, we have created this guide, covering everything from how to find your first contract to opening a business bank account.
Employers will turn to contractors in times of need as individuals who are able to manage projects and implement change when needed. Contractors provide a cost-effective solution for companies who need temporary manpower for a particular task, as they do not want to make the long-term financial commitment that comes with hiring a permanent employee.
You may be considering a move from permanent employment to contracting for a variety of reasons, potentially higher rates of pay, flexible working hours and the ability to be your own boss may resonate. Nevertheless, the prospect can be daunting so how do you go about and what should you expect?
Finding a contract is exactly the same as finding a job, and just with finding a job your first point of call may be contacting recruitment agencies that specialise in your area of expertise. Speculative applications to companies that you would like to contract for could also be favourable. Companies that need to recruit in a hurry or don’t have the budget to use a recruitment agency will turn to speculative applications as their first point of call.
Networking is another way that may help you secure contract work. Now that you are working for yourself it is a good idea to get some business cards printed and hand them out to potential clients as well as ensuring that you always have an updated CV. It is worth maintaining a network with previous colleagues, clients, industry professionals and anyone else that may be able to help you find contract work.
As a contractor, you don’t have an employer to ensure that you pay the correct amount of tax and national insurance. In order to take responsibility for your finances, you will be required to choose a way to operate. The two most common ways to contract are through an umbrella company or forming your own limited company; both options come with their own advantages and disadvantages as discussed earlier. If you decide to contract through your own limited company there will be some administration responsibilities that need to be completed. Below are the main tasks that limited company contractors will need to complete before they can start trading.
IR35 is a legislation that was put in place to target disguised employment. The purpose of IR35 is to essentially stop people leaving full-time employment only to work in the same position on a contract basis. This is because in doing so they would be receiving the benefits of employment, such as job security, as well as the benefits of contracting.
As a contractor, you will need to establish your IR35 status before you sign a contract. Your IR35 status will either be outside IR35 (not caught by IR35) or inside IR35 (caught by IR35). You are still able to work in a contract that is inside IR35, but you will need to declare that you are inside and you will not be entitled to all of the contractor benefits that you would be entitled to if you were outside IR35.
If you would like to become a limited company contractor you are going to have to open a limited company. Forming a limited company is a very straight forward process, which can be completed in one working day. At Nixon Williams when you become a client of ours we will form your limited company free of charge and also register your company for PAYE, VAT and corporation tax.
All limited company contractors will need to open a business bank account in order to get paid. As part of our limited company formation service, Nixon Williams will provide assistance in opening a business bank account with Metro Bank. For more information please see our Guide to setting up a Business Bank Account.
Taking control of your finances as a contractor can be a daunting task. Many contractors decide to appoint an accountant who will help them with their accounts, ensure that they are working as tax-efficiently as possible and answer any questions.
Nixon Williams provides fixed-fee accountancy packages for contractors, which covers all of your business and personal taxation needs. Our service includes a direct line to your own dedicated accountant who you can contract as many times as you need to without any additional costs.
If you would like more information about moving from permanent to contracting, forming a limited company, contracting in general or how Nixon Williams can help you please get in touch with a member of our new business team on 01253 362062