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Starting out as a contractor can be a daunting but rewarding step. If you’re considering joining the world of contracting, or just want to know more about it, our guide covers some of the most frequently asked questions (and answers!).
 

What is a contractor?

Do I need to register as a contractor?

What business structure can contractors use?

Am I affected by IR35?

How do I find contracting work?

How much do contractors charge?

What happens next?

Contractors provide skills and services for a set amount of time, enabling clients to hire the specialist support they need in order to complete a project.

Working on a self-employed basis means you won’t have the same entitlements and benefits as an employee, but you’ll normally be hired for the duration of a contract so it can be more secure than other types of freelancing.

There are a few considerations to this. Contracting isn’t a business structure in its own right, so if you decide to become a contractor, you’ll need to decide what sort of legal structure you want to set up.

If you work in the construction industry and use subcontractors to carry out work, then you’ll also need to sign up as a contractor for the Construction Industry Scheme (CIS).

 

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Like any business owner, contractors can choose which legal structure is most suitable for their needs. The way you set up your business affects the way you report information, how you pay tax, and even how you pay yourself, so it’s a big decision.

There are several options, although for lots of contractors the decision will boil down to:

There are advantages and disadvantages to every method – it all depends on your individual circumstances.

The way you set up your contracting business can influence whether or not you’re affected by IR35 rules. In simple terms IR35 basically deals with the way contractors are meant to pay tax if they work through their own limited company.

The client you provide services to must make a ‘determination’ to assess your IR35 tax status based on several factors, such as the length of the contract. If they determine that the contract is ‘inside IR35’, then they’ll deduct tax and National Insurance from your payments as if you were an employee (which can affect your cash flow).

IR35 can be very complicated, but if you contract as a limited company then it’s well worth researching how it works.

Lots of contractors find work through agencies and jobs boards, or even vacancies advertised by the client. You can often register for these online, but it’s also worth checking if there are agencies who deal with your particular industry in the local area.

You’ll often be asked to provide a CV, so keep yours up to date each time you complete a contract!

 
Larger contracts might also invite you to prepare a pitch for the work so you can provide more details, such as costings and timeframes.

Deciding how much to charge for your services can feel strangely terrifying when you’re starting out, even when you know the going rate for your industry. Some contracts will be advertised with a pricing structure included so, like any other job application, it’s up to you whether or not it’s enough.

Other jobs might ask what your rates are, so taking the time to do some research will help you have an answer lined up ready. There isn’t a magic formula to work out fees, but as a starting point take a look at:

Contractors have the same needs and responsibilities as any other type of business owner, although the exact nature of these depends on what type of structure you set up. In general, this will include:

Our article about starting a business goes into more detail about what to do.

 
Need to speak to an accountant? Call us on 020 3355 4047 or learn more about our accounting services for contractors .

About The Author

Rachael Johnston

A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people! Learn more about Rachael.

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