There are many benefits over employment, writes Whiting & Partners Contract Specialist, Vanessa Pearson
Changing careers can be a challenge but leaving the employment wage treadmill to become a contractor can increase your earnings, saving on tax and national insurance as well as providing more flexible working hours.
Contractors are essentially self-employed individuals who work on projects for a set period of time or until a piece of work is completed.
When compared with wage-slaves, contractors can command higher pay rates and enjoy both the freedom and flexibility of choosing their projects and so take greater control of their careers.
There are important steps to follow and, frankly, this is where our help is often required.
First, research your proposed market to scope out the demand for your skills and to find out what rates are on offer. Typically, as a contractor you will then set up a limited company and benefit from taking a low salary, supplemented with dividends.
Once you have identified a contract, you will need to consider HM Customs & Revenue legislation known as IR35 which determines if you are genuinely self-employed. We would review your contract to determine your tax status and then advise on how to improve the terms of the contract.
We regularly review HMRC tax cases to give the most up to date information. For example, HMRC recently lost a case based on the fact that the contractor was able to control how, when and where their work was done, and had no rights to holiday, sick pay or employment benefits. They were therefore proven to be self-employed.
Company tax benefits will apply too. These include claims for travel and subsistence costs plus other expenses. All will help to keep the company tax bill down. We have local specialists in contractor accounting who can help, advise and support your business.