Becoming a Contractor

Click on the below link to download our free, quick and easy to read Becoming a Contractor Fact Sheet:

  Becoming a Contractor Fact Sheet

Other Contractor case studies available include: 

Contractor Case Study – Moving from Permanent to Contracting

Permanent vs Contract

Moving into contracting can be financially rewarding with regards to take home pay, and mentally stimulating in terms of job satisfaction and overall control. However, the transition into the world of contracting isn’t without its own challenges.

Take for example James, an IT contractor who moved from a full time position in a large plc with a safe and reliable monthly salary and a plethora of employee benefits, such as: pension, life assurance, mobile telephone, 25 days ‘paid’ holiday (which he rarely got a chance to take) and Christmas parties!

However, the position also came with a fair sized helping of office politics, a huge blame culture, poor promotion opportunities, very little job satisfaction, a manager who worried more about his profile than actually completing a project or the welfare of his staff. Paralysis by analysis was also a major issue - it really did seem like they could talk themselves out of any job, if they really thought hard enough about what could go wrong.

Securing a contract and choosing between limited and umbrella.

So, after James had updated his CV, added up the cost of the benefits his current employer provided him with and registered with a few jobsites, he finally secured a position and was offered a role paying £400 per day.

James then had to make a decision and choose which way to operate, via an umbrella company or through his own limited company. He decided to work through his own limited company, this was based on:

  1. Control, he didn’t want to involve another third party which already included his recruitment agency.
  2. Financial reward - he would obviously take home more money.
  3. If after working through his own limited company for at least three months he then decided to go back to a permanent job, he would still earn more than working through an umbrella company over the same time frame.

Steps involved in going limited - What your accountant does and what's left for you to do.

Initially, James had lots of questions about exactly how he was going to work through his own limited company. SJD’s New Client Helpdesk answered all of his questions over the phone, via e-mail and even met with him in an office near to where he worked, all free of charge.

SJD helped James form a company, and provided James with advice regarding share allocation, directors, company secretaries and use of a registered office.

James also needed to open a business bank account, which we provided an application for using Cater Allen. The business bank account was in James’s name – SJD didn’t have access or have any control over this account whatsoever. SJD also provided James with information about VAT and helped him understand if the Flat Rate VAT Scheme would be the best way forward. James also took out professional indemnity insurance.

James’s recruitment consultant advised him his contract was outside IR35 we also reviewed his contract and confirmed it to be outside.

The company formation details, business bank account application and VAT registration documents were mailed first class that same night.

The only thing left was for James to do was to visit our site and click the ‘become a client’ button on our home page, completing these details only took a minute.

Working with your accountant.

An accountant from SJD, in this instance - Ryan Dempsey, then contacted James and ran through a few more details. Although James lived outside London he wanted his accountant to be based inside London near to where he was about to start contracting and most likely where future contracts would also be based (SJD has offices in all major cities so this wasn't a problem). James could then see Ryan at lunchtimes if necessary, thereby keeping downtime to a minimum. Meetings with accountants are free of charge and e-mail / telephone contact is unlimited. SJD’s fee is £110 plus VAT per month and is an all inclusive fixed fee service.

James was asked to keep a track of his incomings and outgoings, just as any limited company would do and record the information on a spreadsheet provided by his accountant. This information was then used to help James understand how much to take in the form of salary and how much as a dividend. James raised his own invoices every week and received payment directly into his company bank account.

James was in full control of his company bank account, and was responsible for moving money from his business bank account into his personal account every month. His SJD Accountant was always on hand to provide professional tax advice, help with corporation tax calculations, VAT and Revenue returns, payroll, companies house issues and compile James’s year-end accounts.

From time to time James would have to send a cheque to HM Revenue and Customs and sign a few documents, but after a while these became a matter of course and didn’t take up too much of his time.

Finally…was it all worth it?

James is earning more than he was before as a permanent member of staff, yes he misses some of the fringe benefits but is far more in control of his destiny. In fact he is now thinking of expanding the reach of his company and moving more into the consultancy market - he also has his own website which is attracting interest from prospective clients.

James comments “Contracting isn’t for everybody, neither is owning your own limited company. It has its fair share of up’s and down’s, but for me it has been the best decision I’ve taken in years. It would now be almost impossible for me to go back to work in the world of the permanent employee, what ever that really means, after all most people are only on four to 12 weeks notice, so it’s not really that permanent after all!

As for working with SJD I can’t compliment them highly enough, from my initial questions with Michelle in the New Client Team to my Accountant Ryan. They made what initially seemed like a long and complicated process, into something that was easy for me to understand and make sense of. I received a calendar of the important dates along with text reminders and telephone calls just so I wouldn’t miss anything, they even do my personal tax return as part of the monthly fee”.

If you have any queries or would like further advice please don't hesitate to contact us on 0500 152500 / 01442 275789 or email michelle.turbutt@sjdaccountancy.com.

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again!

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 11,000 clients.

We are the only National specialist firm of accountants with offices in all major UK cities so you’ll never be far from your accountant. SJD also have more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA. You’ll also be pleased to know that we are one of the lowest priced as well.

SJD have also won every relevant industry award possible, including:

  • The British Accountancy Award Winners 2011 for ‘Accountant of the Year’.
  • Winners of the Accountancy Age Awards for Excellence in 2007 and 2004, finalists in 2010 and all years since 2003.
  • Four time winners of the 'Best Contractor Accountant' award voted for by visitors to Contractor UK 2010 to 2007.
  • Winners of the "Sunday Times Best Small Companies to Work For in the UK" Award, achieving the highest position ever for a firm of accountants.
  • 'Excellence in Customer Service' - Finalists National Chamber of Commerce Awards 2008.
  • 'Business of the Year' - Finalists National Chamber of Commerce Awards 2008.
  • 'Outstanding Three Star Status' - Best Companies Accreditation 2009.
  • Award for 'Customer Commitment' at the Institute of Customer Service UK Customer Satisfaction Awards 2011.
  • Deemed PCG Accredited Accountants and fully MSC compliant.
  • UK Customer Experience Award for 'Best Professional Team of the Year' 2011.

We offer all clients:

Free face-to-face meetings. This is another unique service, only SJD offers free face to face meetings - tax is complicated and sometimes only a meeting will do.
Unlimited access to your own dedicated accountant. No call centres, no outsourcing, no automated call handling. Simply telephone, e-mail or meet your own dedicated accountant face to face.
Money back service guarantee. All your telephone calls and e-mails will be answered the same day or we will refund your monthly fee's.
Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market.
All inclusive low cost monthly package which includes completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns.

All this for a fixed monthly fee of £110 plus VAT, which is one of the lowest prices in the market. And most importantly, in a recent survey 98% of our clients rated SJD as 'better than other accountants' - we are working hard to convince the other 2%!

If you have any question about contracting or would like any further advice please either contact your SJD Accountant or call our new client services helpdesk on 0500 152500 / 01442 275789 or e-mail michelle.turbutt@sjdaccountancy.com.

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again!

You may also find the following pages, guides and case studies useful:

Take home pay calculator - How much could you be taking home
Contractor FAQ - All your frequently asked questions and their answers
First time Contracting or Freelancing? - A summary of the alternatives along with pros and cons
Choosing an accountant - For a full review
Step-by-step Guide to Contracting - Download a FREE copy of our guide
Limited or Umbrella? Can't decide? - We help you decide which is best for you
Guide to Contracting - All the best guides to contracting in one place
Expenses Guide - Know exactly what you can claim
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35.

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