If you are considering becoming a contractor, or are a seasoned veteran, here are 10 success tips from the IT Contracting team to help you get the most out of your contracting career.
Boost your potential earnings
As a contractor, you are likely to secure a significant rise in your take-home pay, and may well increase your spending and lifestyle accordingly. One of the main benefits of moving from the world of permanent work into contracting is the increased potential to make good money, however, you should always prepare for times when contract work is harder to find and put away funds for a rainy day. If possible, try to build up a rainy day fund to support your lifestyle for six months.
Spending other people’s money
If you are a limited company contractor, make sure you transfer all your tax liabilities into a separate bank account. This includes the entire VAT element of all invoices you send out and your outstanding Corporation Tax liability. Also, try to put aside a regular sum each month to settle your self-assessment bill on January 31st, as well as any payments on account which become due in January and July.
Find a good accountant
Without a doubt, your accountant is your most important ally as a limited company contractor. A good contractor accountant will ensure you meet all HMRC and statutory deadlines on time, they will save you money, provide timely advice as needed, and make you feel reassured that your business affairs are being looked after.
Of course, finding the right accountant requires a fair bit of effort in its own right. Try our tips for choosing a contractor accountant as a starting point.
Keep in touch
Like many others, contracting is a people business. Many seasoned contractors secure much of their work via existing contacts (other contractors, agents they have worked with before, ex-clients, or via their own websites) rather than job boards.
Try to keep in touch with other contractors, and harness the power of the web (particularly LinkedIn). Never before has it been easier to keep in touch with other people with minimal effort.
Don’t ignore IR35
If you are caught by the IR35 rules, you will be significantly worse off financially as a result. If you are a limited company contractor, make use of a specialist IR35 contract review service before starting a new role, and IR35 insurance cover just in case. Both services are inexpensive and could save you potential pain in the long run.
Despite occasional signs that successive Governments may overhaul the IR35 regime, the rules are very much in place, and contractors should not be complacent.
Always use an up-to-date, well presented and concise CV when you apply for contract roles. Make sure your most recent roles are displayed on the first page of the CV and tailor the CV to suit the role if specific skills need to be highlighted.
You will be working with permanent members of staff on most contract postings. As a contractor, you will be expected to find your feet quickly, and to get on with the job straight away. Over a career as a contractor, you’ll meet permies who resent contractors, others who expect you to be an expert at all things technical, but the vast majority will treat you like a normal colleague. In all cases, however, be sure not to brag about your contract rate – this won’t go down well.
All successful contractors have learnt to be adaptable over the course of their careers. Unlike many permanent roles, you will often need to compromise when seeking contract work – particularly when the market is subdued. You may need to travel to different parts of the country to source work, take less lucrative work for a while rather than waiting on the bench while the dream job comes along, and take roles which neither stretch nor stimulate you intellectually. Over a number of years, you’d hope that the number of ‘great’ contracts makes up for the dull ones, which pay the mortgage but are uninspiring.
Limited or umbrella?
Take time deciding upon a trading structure. The limited company route is the most tax-efficient, and remains so even after the April 2016 dividend tax hike. However, for short term roles, and a hassle-free way to go contracting, the umbrella company route appeals to many. In both cases (choosing an accountant for your limited company, or choosing an umbrella company scheme), you should spend time researching the market for the right provider for you. Read our limited vs umbrella guide for more details.
Some contract roles will require you to take out professional indemnity cover as standard to cover you in the event that you inflict damage on a project due to carelessness or misfortune. The cost of contractor insurance is very low considering the peace of mind it offers, even if your contract doesn’t specify taking out cover as a requirement. You should be able to get a package including professional indemnity and business liability cover for a few hundred pounds. Tax investigation cover is also very competitively priced and will cover you in the event that you need professional representation during a tax dispute.