How Do I Become a Contractor?
As the job market evolves, an increasing number of individuals are considering the option to become a contractor. Contract work provides a significant degree of flexibility and autonomy, enabling individuals to choose from a wider range of projects and often resulting in higher earnings.
Cool Company knows the value of contract workers, having worked with highly experienced and talented contractors for many years. We also know how daunting it can be to step away from the permanent working model. We’ve therefore developed this guide to help you learn the best steps to take to become a professional and successful contractor.
How to become a contractor in the UK
If you’re considering a career as a contractor in the UK, you may have been contemplating the idea for weeks, months, or even years. While the prospect of contract work can be exciting, leaving the security and stability of permanent employment can be daunting. That’s why we advise against making such a decision on a whim. Instead, it’s essential to carefully consider how to become a contractor in the UK and take the necessary steps to ensure a smooth transition.
The first step is to decide what field of contracting you want to go into. What sector best sets your creative mind whirring? What skill sets can you offer? What experience do you have? It’s easier to break into an industry you’ve got experience in, but if you’re willing to put in the hours (and potentially, money) into learning a new skill set then there’s nothing stopping you from branching out.
Once you know what sector you want to work in, you need to research, research, research.
Research is so important in elevating your understanding of your given market. As well as learning what potential work is out there, you can also learn the rates being offered by other contractors to know how to price yourself.
When you feel armed with the right knowledge, begin to look online to find a contract. Online job boards are a great place to start, as well as checking company listings and social media sites such as LinkedIn.
What Kind of Employment is Right for Me?
If you want to become a contractor in the UK, there are three main routes you can take towards contracting freedom, and its important to understand them and their advantages to make the right decision for your contracting future.
Recruitment agencies work on behalf of their organisation to find independent contractors for specific assignments. This is a good option when you are just starting out in the industry to build your resume and gain industry expertise as well as build your client base. However, as they find work for you, you have no control over your own branding and you accept lower pay.
Setting up as your own Limited Company or Personal Service Company is the most complex route to contracting. Although this route boasts advantages such as an efficient tax model and tax-deductible business expense, this method is expensive and time consuming and doesn’t benefit all contractors depending on whether or not their contracts fall inside or outside of IR35.
Umbrella Companies provide payroll services to contractors, and they manage all of your compliance issues, such as invoices, tax deductions, and other financial admin. This route allows contractors the freedom to run their own company, with location independence and flexibility, whilst not having to worry about compliance problems. With low monthly margin and full time support offered, this can be highly beneficial to contractors.
What Legal Requirements Should I Be Aware Of?
Once you make the change to contract work, you must tell HM Revenue and Customs (HMRC). Employment law doesn’t cover the self-employed in many cases because you are essentially your own boss. Depending upon the route you take into contracting (recruitment agency, limited company or umbrella company) you need to ensure HMRC knows of this change to your employment.
What Financial Administration Am I Responsible For?
As a contractor you’re responsible for your own accounting or bookkeeping. You will need to pay and file taxes on the income you’ve earned from the client, and you will need to be responsible for getting insurance to protect yourself. However, as a part of an umbrella company, this responsibility transfers to them and you can focus on the job at hand.
Key Advice to set up as a Contractor in the UK
The most important thing is to do your research first. Make sure you know the ins and outs of the market you want to work in and what financial rules apply to your shift in job route.
Contracting isn’t always easy, and you should be aware of the potential downsides, but it can be incredibly rewarding with high earning potential, work/life balance and diverse opportunities.
Do you want to know more?
Do you have any questions or are you ready to get started with Cool Company?