Moving from employment to contracting may seem quite a daunting thought at first. However, it doesn’t have to be with our step-by-step guide on how contracting can work for you.
Here’s some top tips to help ease you into the transition.
Ensure contracting is what you want
Contracting will offer increased earning potential, flexible working hours, autonomy in your work and much more. But you also need to weigh up the risks, such as only getting paid when you work, no holiday or sick pay or having to deal with the legislation surrounding IR35. All these risks can pose some uncertainty over your expected income and so you will need to decide whether the benefits of contracting outweigh the potential risks.
Quit your current job
The nature of contracting means that you will potentially need to be immediately available to start contracting, or available within a couple of weeks at the most. Therefore, it is likely that you will need to serve your notice period whilst seeking a contract role. This may not be the case in every scenario but you need to be aware of how fast-paced the market can be.
Find a contract
One of the options you have is to register with recruitment agencies who have the abilities to place skilled contractors into a suitable role quickly. You may find some recruitment agencies specialise in a certain sector, so finding one that specialises in your line of work may help finding a role even easier. An alternative is that you scan the internet yourself, looking at job boards etc but this is likely to be time consuming for you to do.
Once you have your contract – get advice from an accountant, such as ourselves, to review your contract from an IR35 perspective as this will have tax implications on you.
Get the right business structure – Umbrella or Limited
Opting for an umbrella company would work for people who do not want the hassle of dealing with paperwork or administration. However the downside with an umbrella company is that it will yield a lower take home pay as you will pay PAYE and NI on your earnings.
Opting for a limited company means that you are likely to have a higher take home pay through the ability to pay a low salary and dividends. You will also be able to claim for certain expenses through a limited company which you cannot claim for through an umbrella company.
If you have decided that contracting is the career change you are after, we can help set up your company, register for all relevant taxes and assist with setting up a company bank account all ready for when your contract starts. We’ll be there to help you every step of the way.