Are you ready to take charge of your career and become your own boss? Launching your journey as a contractor can open up exciting opportunities and give you more control over your professional life. As the gig economy continues to grow, more professionals are exploring the world of contracting to enjoy greater flexibility and potentially higher earnings.
In this article, we’ll cover the essentials of understanding the contractor lifestyle, choosing the right business structure, and setting up your contracting business. You’ll also discover tips to find and secure contracting opportunities, navigate important considerations like invoicing and professional indemnity insurance, and stay compliant with regulations such as IR35. Whether you’re aiming to become a general contractor or an independent contractor in a specific field, this article will help you take your first steps with confidence.
As a contractor, you’ll experience a unique blend of freedom and responsibility. You’ll have the flexibility to choose your projects and work environment, often with the option to work remotely. This lifestyle allows you to shape your career path, continuously learn new skills, and potentially earn higher rates compared to traditional employment.
One of the main draws of contracting is the variety it offers. You’ll work on diverse projects across different industries, keeping your work interesting and expanding your skill set. This exposure can enhance your marketability and open up new opportunities in the long run.
However, it’s important to understand that contracting also comes with its own set of challenges. You’ll need to manage your own business, handle administrative tasks, and be prepared for periods between contracts. Despite these challenges, many find the contractor lifestyle rewarding, offering a balance of professional growth and personal freedom.
Selecting the right business structure is crucial for your contracting career. As a contractor, you have several options to consider, each with its own advantages and implications.
The main structures to choose from are:
Your choice should align with your personal circumstances, considering factors like liability, tax efficiency, and administrative burden. If you’re unsure what might be the best structure, please get in touch and we’ll help you to make an informed decision.
When making the move to be a Contractor, it’s important to understand the tax implications. Depending on your setup and whether factors such as IR35 come into play can have a big say on what tax is due. This is an area you definitely don’t want to get wrong, as you could end up with a scenario where you’re paying more tax than you need to, or conversely you find yourself in trouble with HMRC. Of course, we’re happy to help advise you on any such matters.
To launch your contracting career, you need to set up your business properly. There are a number of factors you need to cover:
Register Your Company (if you choose this option)
The first step you need to take is to register your company with Companies House. You can do this online for £50 or by post for £71. Online registrations are processed within 24 hours, while postal applications take up to 10 days. You’ll receive a certificate of incorporation once registered. If you want help, please get in touch.
Contracts
Before you sign your life away, it’s important to have the right right paperwork in place. You don’t want to be in a position where you’re left exposed. At WCL, we’re more than happy to review any contracts, or even draft contracts.
Company Bank Account
Next, open a business bank account. You’ll need proof of ID, address details, expected turnover figures. If it is for a company banks will also also require proof of company incorporation and some banks may require your company UTR (Unique Taxpayer Reference) issued by HMRC when you register for Corporation Tax.
Financial Software
Having the right software in place can make your life so much easier. At WCL, two items of software we highly recommend are Dext and Xero. These will allow you to automate a lot of your processes in terms of invoices and tracking finances. They’ll allow you to stay on top of your numbers so you can see exactly how everything is going. We can get you set up and provide full training.
As well as Dext and Xero, if you go down the sole trader route, you’ll also need to be aware of “Making Tax Digital” changes that are on the horizon – again, we can advise you on what this all means.
Insurance
Finally, protect yourself with appropriate business insurance. Professional indemnity insurance is crucial, especially for IT contractors, solicitors, and engineers. It covers you against claims if your service unintentionally causes a client to lose money. Many clients require this insurance before working with you.
Conclusion
Becoming a contractor is an exciting opportunity. It can also be intimidating and challenging, especially when you’re trying to get started and work out the best route to follow.
You need not worry, at WCL we have a lot of experience in this field. We can help guide you and support you through this transition. If you’re ready to make the move, please get in touch. We’d love to hear from you.