Your guide to contracting in the UK

Published on : 27th September 2022

Your guide to contracting in the UK

We are often approached by people who have not contracted before. They might have been in a permanent role and are considering contracting for the first time or they may have been a contractor in the past and want to check the latest practices in today’s market.

If you are considering contracting, reading our guide may help you make that decision!

So why consider being a contractor?

You like being a subject matter expert

A contractor usually is someone who has become a deep subject matter expert who may have been in a role for a number of years and has built up significant experience. They typically now want to use those skills and experience in other organisations to help them deliver solutions and outcomes to their customers.

You want flexibility

Contractors usually have more flexibility in the ways of working with time frames of typically six to twelve months. This also gives them the option of using that flexibility to share their skills in different organisations and better understand how different places work given the contractor greater experience they can help other companies with in future.

This also allows the contractor to see how various organisations work and use their skills and knowledge to help add value to that organisation. This in turn increases their subject matter expertise and knowledge, thus increasing their value in the market.

It often keeps you outside of the“office politics”

Many contractors also find that this way of working offers them the chance to stay outside of the politics of an organisation with the goal to focus on tasks, delivery and outcomes. Experienced contractors are often not afraid to ask difficult questions or challenge the status quo; something significant within any organisation.

It provides increased remuneration and reward

The financial rewards are also an attraction for many as the rates can be very lucrative (especially in the technology space). It also might also open up other opportunities that had not been considered before and provides the chance to work with many other stakeholders who they may not have worked with in their roles before.

Also, your travel expenses for business journeys by any mode of travel are allowable under your limited company.

Things to think about when becoming a contractor

Define your target market and network

You need to define the clients, agencies and partners you want to work with These need to be people that you can build trusted, long-term relationships with that you might need to call on to secure your next contact. 

It is important to keep in touch with them and keep them up to date with your skills, experience and availability. An up-to-date CV is essential in this respect so they are able to assist you in finding that next role.

Get your tax and finances organised

You will need to get your finances in order and find an accountant who can support you in doing your financial accounts. You will need to set up a limited registered company and organise professional indemnity insurance. As you will probably be a higher-earning individual, you will typically need cover of between half to one million pounds.

You will also need to register for VAT which comes into force if you generate more than £85k revenue in the UK in 2022.

Consider umbrella company options

Another option is to use an umbrella company which can actually set up a limited company for you on your behalf. This can include managing your end-of-year self-assessment tax return and ensuring any HMRC and IR35 considerations are taken into account.

Contracts and payroll are often included as is the professional indemnity insurance. This route does include fees but is much more convenient than doing it all yourself.

Whatever option you use, ensure you get all costs itemised upfront from any provider, so you can make an informed decision that suits your objectives.

If it sounds good, go for it!

So if you are nervous about contracting, don’t be, it is fun, exciting, full of many opportunities and suits many people - good luck!