How to Become a Contractor

Making the move to contracting can be a daunting time and finding clear advice often proves to be a challenge. That’s why SJD have created our guide explaining all of the steps you need to take to become a contractor.

Do your research

This is the first and most important step. Before you begin, you should answer the following questions:

  1. Is contracting right for you and your circumstances?
  2. Is there a demand for contractors in your field?
  3. Will you be able to make money from contracting?

Find contract work

In order to maximise your chances of finding work, especially in the early days, there are a number of steps you can take to maximise your chances:

Build an award-winning CV

Your CV will often be one of the first impressions a potential client has of you. It is therefore important to ensure that it reflects you as well as possible. You should outline your previous experience and any skills you believe would make you an asset.

You can find more information in the guides below:

Top 5 CV Tips

Top eCV Keywords

Be great at interviews

Preparing for an interview will maximise your chances of securing your new contract. You can follow our guides below for tips:

Interview Strategies – One

Interview Strategies – Two

Decide whether to go limited or umbrella

There are two ways in which you can operate as a contractor: through an umbrella company or your own limited company. Both routes have their own benefits and drawbacks but the best route for you will depend on your unique circumstances.

You can also view our table below for a breakdown of the advantages and disadvantages:

Limited Company

PAYE Umbrella


Advantages


Advantages

The most tax efficient way of working

 Very easy to use - simply enter your timesheet and expense details and wait to be paid

Claim a wider range of expenses

 All tax and NI is deducted before you receive your money, so you will have no further taxes to pay

 Access to the Flat Rate VAT Scheme

Ideal for short-term contracts

You keep complete control of your financial affairs

 Idea; for contracts less than £25k per year

 Greater opportunity for tax planning

Someone else will be doing the paperwork


Disadvantages


Disadvantages

You will have to complete your own paperwork

 The more expensive way of working - you will receive a salary that is subject to full PAYE Tax and NI

Can be costly if you contract for a short period of time then return to permanent employment

You are reliant on the umbrella company to collect your money from the client or agent and use it to pay you 

Not ideal for contracts less than £25k per year

 You have no control over your contracting finances (for example, dividends)

For more information about deciding to go umbrella or limited, you may find our guide to using an umbrella company useful.

Take home pay

The amount you could earn is one of the biggest factors for contractors when deciding which route they should take. Although limited company contractors generally earn more, a greater level of responsibility falls to you. 

You can find a detailed summary of the earnings you could expect depending on whether you choose the limited or umbrella option. 

You can also use our take home pay calculator to work out how much you could earn through your own limited company and an umbrella. 

Find an accountant

Entrusting your finances to an accountant who understands your needs as a contractor is paramount. As the UK’s leading contractor accountant, you can rest assured knowing that your accounts are in good hands. 

To find out how SJD can help you as you begin your contracting journey, call the New business team on 01442 275789 or email newbusiness@sjdaccountancy.com.