Contracting Versus Employment
Contracting can offer many benefits over employment, writes Whiting & Partners SME expert Vanessa Pearson.
Changing careers can be a challenge but leaving permanent employment to become a contractor can increase your earnings and provide more flexible working hours as well as saving tax and national insurance.
Contractors are essentially self-employed individuals who work on projects for a set period of time or until a piece of work is completed.
Contractors can command higher rates than employed workers and enjoy the freedom and flexibility of choosing projects and controlling their career.
The first step in becoming a contractor is to undertake market research to check there is a demand for your skills and to find out what rates are being offered.
Typically a contractor will then set up a limited company and benefit from taking a low salary plus dividends.
Once you have found a contract, you will need to consider government legislation called IR35 that determines if you are genuinely self-employed. We can review your contract to determine your tax status and advise on how to improve your contractual terms.
Whiting & Partners 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.
There are company tax benefits too, such as being able to claim travel and subsistence costs and other expenses which keep the company tax bill down.
A specialist contractor accountant can help advise and support your business. For more information call Whiting & Partners on 01284 752313 or email firstname.lastname@example.org.