Research your market

When embarking on anything new it is good to know what you are dealing with and so you need to do research. Firstly look at yourself and what skills you have that you can offer organisations. Find out if there is demand for your skills? Do you need to expand or improve on the skills you have to make them more marketable to organisations that would be interested in hiring you? Then look at who is hiring the skills you can offer. Is there a specific industry that your skills appeal to and will they be able to sustain the number of people who you will compete with in offering these skills? Will you need to physically relocate so working on these contracts will be easy for you and won’t entail lengthy journeys? Now you’ve found what skills are in demand and which industry is most likely to engage you, the financials have to be researched. What is the going rate for your skillset? A good place to start is your industry body to see if they have any salary rates for your skillset. Online job boards will also give you a good insight on what rates organisations are likely to engage you on and talking to a recruiter will provide you with the inside track on likely lengths of contracts and payment cycles. Armed with this information you can start to judge if contracting is right for you.

Weighing up

So now you know your likely earnings from the skillset you can offer organisations. You know likely contract lengths and how often you are likely to get paid. Does this sit comfortably with you compared to the regular wage you have been earning? When you step into contracting nothing is certain. Organisations have no obligation to keep you engaged particularly if the contract is short they can pay you off early or even stop the contract without notice. Do you have enough financial resources to ensure your monthly mortgage instalment or rent payment can be met? Do you have more than one source of income? Can your contracting be supplemented by this source? Will you need to travel more or will contracting be home based and reliant on your internet connections? What arrangements will you have to make to be able to work from home more. Weighing up factors that are not just related to the contract work itself will help you decide if you are ready to move to contracting.

Attracting Interest

How will you attract interest in what you have to offer? A professional and up to date CV is a good backstop but in the 21st Century your work experience and the skillset you offer needs to be more dynamic and relevant to generate interest in you. Create an online profile that showcases the successes you have achieved through the skills you can offer. Obtain recommendations and testimonials from people you have worked with. Illustrate how easy it is to work with you and how dynamic you are with your chosen communication methods. Most people are now social media savvy and what your postings say will affect how others consider you and whether or not you will take their business seriously. Consider doing a complete audit on everything the general public will see of you both offline and online. Once completed action anything you need to and then consider if you can attract interest in the skills you offer in a commercial setting. Keep refining until you are happy with the outcome and have your best foot forward to attract interest.

Understanding IR35

IR35 is a hugely contentious piece of tax legislation that directly affects contractors. Designed to stop individuals working as disguised employees it will tax then at a similar rate to employment if HMRC considers there is Supervision, Direction and Control (SDC) over what they do by the end client and therefore does not meet the definition of self-employment.

IR35 is currently undergoing reforms whereby the original responsibility of deciding if the contract is inside or outside of IR35 rested with the contractor, is being transferred to the end client with the tax liability resting with the fee-payer. This reform has already taken place in the public sector and is due to come into force in April 2021 in the Private Sector.

Although you may be certain that the skills you can offer and the service performed cannot be subject to supervision, direction and control you need to consider that in reality and on contract these may be compromised. Every contract will need to be reviewed and discussed with the end client before being implemented. If you are caught inside IR35 it will seriously curtail the expenses that you can claim back and could impact on how financially advantaged you are from going down the contracting route.

Structuring

If by this step contracting is still on the cards for you, then how you set yourself up needs to be considered.

Sole Trader

Depending on how you get your contracts you may decide to keep it simple and become a sole trader. You will register with HMRC as self employed and pay National Insurance Contributions and income tax on the profits you make. Your Self-Assessment Tax Return will need to be submitted annually. You may also need to register for VAT if your earnings are in excess of £85,000. A sole trader is not a separate entity and you will be personally liable for business debts. If you obtain work via a recruitment agency then this option will not be available to you as payments to you cannot be made gross.

Limited Company

If your horizons are long term and you want to grow into a bona fide business then Limited Company will be a good option to consider. This is a separate legal entity with a director (you) who is responsible for the good running of the company including the payment of taxes, submitting annual statutory returns and maintaining financial records. Your earnings will be taken as dividends from the profits of the company. You will have the option to organise your company’s affairs and manage expenses. There is quite a lot of responsibility and organisation relating to a limited company and many contractors engage specialised accountants who are well positioned to assist the contractor to work as tax-efficiently as possible.

Umbrella Company

An umbrella company is an entity that has an employment contract with the contractor. Their principal function is to ensure the contractor has a payroll facility which is flexible enough to take payment from multiple sources e.g. multiple agencies and end clients. This gives the contractor considerable freedom in who they work with. Apart from raising a timesheet much of the administration for raising invoices, collecting payment, calculating and paying away taxes is undertaken by the umbrella company who liaises with the recruitment company and if necessary the end client. Umbrella companies are a viable option if you want to try out contracting or don’t see it as a long term career. Relatively cheap and administration-friendly they can get you on to the contracting road quickly and efficiently.

Working with you

If you have been through the 5 steps and still think that contracting is the right option for you then we would be happy to help you on your way.

We work with contractors to set out their options and help them to choose the best way to proceed. As a broker we work with many providers and regularly review them to ensure that our recommendations are best in class. This means that you don’t have to waste endless hours trying to make a decision. We will have you set up quickly and can undertake a lot of the registration process as well as get you the best deal in town.

We know how the contractor market ticks, what’s trending, which providers are offering the best value and service, and how legislation changes can have a knock on effect on you. Bringing together an extensive range of service options, including umbrella companies, contractor accountants, insurance brokers and mortgage brokers, we can present you with the best providers and even help you deal with the transition from your current set up.

Latest news

For the latest news and information affecting contractors, including key topics such as IR35, please view our blog page here.

Is Umbrella Exchange right for you?

Yes, we are pretty sure it is. Your time and effort are at the heart of everything we do. Utilising our extensive experience and knowledge and identifying a good deal enables us to know what will work for your individual circumstances.

So if you are working on assignment in the public service sector then we won’t waste your time discussing an accountancy solution but can help you choose an umbrella company. If you are a contractor who has had a brush with IR35, then we’ll look at how a contract review service can be beneficial as part of an accountancy package. Although our name is Umbrella Exchange, it’s not just umbrella companies we can help you with.

Whether you describe yourself as a professional contractor, consultant, like to just dabble in project work from time to time or are the MD of a multi-sector recruitment firm, we at Umbrella Exchange think we have some really great options and would like to work with you.

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