BECOMING A CONTRACTOR: UK EDITION.

Pierce Johnston

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I often get asked by people who are currently in permanent employment, when the right time to get into contracting might be and also, how to set about doing so.

This article read, should hopefully offer some insights and support for anyone who is UK based and looking to make the switch!

Is it right for you?

This is the first question you should ask yourself.

For some, a reason to contract could be to choose their own hours – another could be for the chance to work on their own side projects.

You could also want to contract as it will give you the opportunity to constantly work on a variety of different projects for different businesses.

Another reason and I guess more common would be for higher pay – contracts bear more risk of course but in some instances, a contractor could be getting paid almost double what they are earning in employment – for the same position.

It’s worth mentioning that you also lose a lot of positives when you ditch permanent employment – to list a few;

  • Stability (Having continuous work isn’t guaranteed)
  • Company benefits (inc. paid leave)
  • Lack of career guidance/goal setting from others
  • Funding your own training where necessary

As touched on there, stability isn’t a guarantee. Contracts can length from anywhere as short as a month (However more typically 3, 6 or 9 months) of initial duration, up to 2 years. It’s hard to foresee what gaps there might be when you will be working on a project or not – my best advice here would be to always have some savings to fall back on, both before you switch into contracting and also for between any future contract positions.

Securing a new contract

Without bias, LinkedIn has become a key resource for you building your contractor presence and your reputation – after all, when you contract, your skills and experience soon become a monetary service to the clients that you work with.

LinkedIn is your online CV – it’s the first thing that most hiring managers look at, thus it is a great way to share your experience and for recruiters & hiring managers to be able to find you (Especially when your profile flags up as ‘Open to Work‘).

There are some Job Boards I would recommend also in the UK, that are great tools for finding something – I would mention CW JobsTotaljobs & CV-Library.

As a contractor, take into account that you will be looking for new positions much more frequently, so building relationships with great recruiters will be key. I would suggest forming long-term relationships with recruiters that you like and those who have a strong understanding and grip on the market that you’re in.

When the right thing comes up, however, it’s important to move quickly. Contract jobs move fast. Often, if a business needs a contractor, they need them to start ASAP. Many positions can be published on a Thursday, filled on Friday and have a contractor in the seat by the following Monday morning…

Ensure that you are keeping an eye on your inbox (My suggestion would be to have your emails + notifications set on your phone), and should something be relevant, be sure to respond right away, with your updated CV and availability to speak if required.

Setting up

What about IR35? 

Well, fortunately, given recent news – the whole headache that has come alongside the current IR35 legislation (brought in last April) – should soon be abolished by April of 2023. Great news for a lot of contractors as it leaves for the contractor to determine whether they are classified as inside or outside of IR35 legislation, taking the risk away from the employer.

Writing about the legislation would be another article in itself, so if you are unsure of what the difference is for now – here is a great article on TotalJobs to explain things in Layman’s terms.

Setting up a ltd. company

For outside of IR35 work, you’ll have to set up your own Ltd. company to start taking on contract work in the UK.

You can do this directly on Companies House and it will only set you back a mere £12. You’ll need to provide a registered address for the company and provide all company information necessary so that it can be publicly available on the Companies House website. This includes information about the company director(s) and their addresses.

There are services that allow you to register a company through them, which will handle submitting the application to Companies House & also provide a virtual address that you can use, keeping your residential address private. There are loads of services like this out there, to namedrop a few – TideYour Company Formations 1st formations.

Banking & Accounting

You’ll need a business bank account that is separate from your personal bank account. This is very important. Choose your weapon!

You’ll have to keep certain records as a director of a company. You can either be brave and manage these yourself, but I would highly recommend that you instruct an accountant to help you with this.

When you run a limited liability company, there are responsibilities you have as a director that you can’t afford to not be aware of – paperwork and deadlines for forms that you need to stay on top off, just like any other company. Having an accountant will make things a whole lot easier. There’s a ton out there so feel free to compare.

Lastly & importantly – Business Insurance, you won’t be able to take on any contracts without having this in place. Again there is a ton out there so have a look around.

For now, this is pretty much it – in terms of the fundamentals of becoming a contractor in the UK. As you can see it can be an extremely quick process!

It’s worth reading

ContractorUK – How will IR35 change from April 2023?

Crunch – Business guide: What is IR35?

HMRC – Important facts for contractors – off-payroll working rules (IR35)

Crunch – Free IR35 assessment calculator

I will soon be following up with a similar article, focused on becoming a freelancer/consultant within Germany. 🇩🇪

Good luck!