Making the move to contracting can seem rather daunting, if you do not have the right support. However at Nixon Williams we aim to make it simple, this guide will answer, some of the most commonly asked questions from our new contractors such as:

  •     How do I make sure I’m paying the right amount of tax?
  •     What is IR35?
  •     Should I set up a Limited company?

. . . and so on. But there is no need to panic, these questions are easily and quickly answered.

To help you, we have compiled some of the steps you need to take when starting up as a contractor. From forming your Limited company to appointing an accountant, and everything in between. If you do have any questions though, and would like to speak to us, please call a member of our new business team on 01253 362062 or email
Research and Preparation

Prior to taking any action regarding your current employment situation, we’d advise you to make sure that you fully research the contractor industry, and your chosen sector in particular - whether that’s anything from IT, to marketing, or even Oil and Gas.

In order to be successful, you will first need to ensure that there is sufficient demand for contractors of your type, and secondly, you need to be prepared for the next steps. During the research phase, you also need to consider what kind of contract you are looking for, and where that might be located. The key secret here is to know your strengths and to play to them, as these specific skills are going to be your best selling point.

It’s a good idea to make yourself a timeline plan of what you are going to do and when. For example:

  •     At what point must you give notice to your current employer?
  •     How long will that notice be?
  •     Do you have any exclusions in your contract that limit you from working for a competitor?
  •     When will you begin the search for a contract?
  •     Have you thought about updating your LinkedIn, or setting up a simple website?

Decide how to Operate

When the time comes to leap into action, you must first decide whether you want to set up your own Limited company, or use an umbrella company – and for each of these there are a few things to consider beforehand. There are of course advantages and disadvantages to either way of operating, and you can read about the benefits and pitfalls of each on our Limited Company or Umbrella Company page.

Setting up a Limited Company

As a quick guide, if you are looking at a contract which is no longer than three months initially, or if you expect to earn less than £25,000 per year gross (before tax), then it would be more beneficial to operate through an umbrella company. This type of business runs as a ‘middleman’ between you and your client and will, in effect, act as your employer - collecting payments from your client and paying you a salary accordingly, with income tax, national insurance and their fee deducted.

Alternatively, if your contract is going to be longer than three months, or you expect to earn more than £25,000 per year gross (before tax), then operating through your own Limited company would be the most tax efficient route. If you’d like more information about this, then please visit our Forming a Limited Company page.

Write a Contractor CV

Writing a CV can be stressful especially if your existing one hasn't been updated for a while. However, it is important to rewrite this to suit the contracting market, as the information you need to include will be a little different. Your new contractor CV needs to be written to showcase your best and most appropriate skills, as this is what will catch a prospective client’s attention. It’s also important to bear in mind that you may need to adjust it for each role that you apply for, to make sure the most relevant skills are highlighted.

For a contractor CV, it is also important to structure your previous experience a little differently - making sure that you outline your previous roles in a way which demonstrates the skills and experience you gained with each, rather than just listing the types of projects you worked on. For more information, please visit our How to Write a Contractor CV page, where you can find a range of helpful hints and tips.

Finding a Contract

Finding your first contract can be achieved through recruitment agencies, in very much the same way as you would find a permanent role. Remember though that it’s not you who has to pay the recruitment agency – as their costs are covered by the company who is seeking a contractor. Think of it as having a free ‘sales and marketing’ team to promote you and your skills to prospective clients. If you would like to know more about working with recruitment agencies, take a look at our Finding a Contract, Agency or Direct post.

Of course there are alternative ways to finding a contract, however as a first time contractor it may be easier to begin your contract search with a recruitment agency. There are also job sites such as CW Jobs, Contractor UK and Techno Jobs where postings of contracted roles are featured.

One other way to find a contract, which may be easier as you become a more seasoned contractor is to go direct. By this, we mean to find the contract through reputation and recommendation from previous clients and the contracting community. As you build up your reputation as a contractor, people are more likely to hire you based on a recommendation from a colleague, and as this progresses you may find that you need recruitment agencies less.

Hand in Your Notice

This should be a very straightforward process, but if you have a long notice period that you may wish to try to negotiate this down, so that you can start your new contract more quickly – or have a little more breathing space before you move into the world of contracting. And of course, if you think you will have to work your full notice, then it’s best to warn a prospective client of this from the start of your discussions.

Agreeing a new contract and then having to tell them you will be unavailable for the first three months, or however long, is not good for your professional reputation. Neither is breaking your contract by leaving earlier than agreed upon, and ending up having to compensate for your employer’s losses – as this could cost you more than just money.

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Set up a Limited Company

Once you have secured a contract, you need to think about how you wish to operate. As we have already mentioned, umbrella companies are intermediaries that essentially act as your employer - whereas, if you decide operate through your own Limited company, you create a legal identity which is completely separate to you. So when the Limited company makes a profit, it is owned by the company - and as a director of that company, you can choose to pay yourself a basic salary plus any dividends.

If you would like more information on forming a Limited Company or if you should operate through an umbrella or a Limited company, you can call our New Business Team on 01253 362062 or email

Find a Specialist Accountant

Once you have secured your first contract, you will need to find an accountant to manage your tax for you - and to provide other accountancy services you might require, as well as support and advice. Whilst there are many options available, as a contractor it makes sense to choose an accountancy firm that specialises in working with contractors, as they have all of the specific knowledge you will need and can deal with all the correct authorities on your behalf - leaving you to get on with the actual work.

At Nixon Williams, we offer a specialist contractor accountancy service from just £95 + VAT a month, which includes a dedicated accountant, formation of your own Limited company, registering for the flat rate VAT scheme and any other services you may need. To find out more, please speak to our new business team on 01253 362062 or email