Entering the big scary world of contracting for the first time can be a daunting prospect. To help you with the transition, we have created some key top tips to make your move into contracting as easy as possible. It is widely reported that the contracting industry has been experiencing strong growth over recent years. This boom has encouraged many people to take up contract work for the first time. As a consequence more individuals than ever before are having to deal with the move into what can seem like a very alien environment at first. However switching to contracting is actually relatively easy and the fundamentals can be learned very quickly. Before you take that leap, there are a few things you should know and consider. We’re here to help with our top 3 tips for first-time contractors.
#1: Understanding your income
Moving from a secure full time job to flexible contract based work is a big change. Contracting comes with no security of a fixed salary which takes some getting used to. The assignments you work and the rate you take are entirely up to you and your chosen client with rates charged on an hourly/daily basis. This is obviously totally different to the fixed salary you are likely to be used to.
To make the change to contracting as easy as possible you really need to understand and set realistic expectations for your new income levels. You can figure out the best rate for your skill set and experience by doing some research and talking to recruiters to find your market rate. Quizzing someone who has contracted for a number of years who is a similar skill level would be an extremely effective way of learning the intricacies of contractor earnings.
#2: Understanding the legislation
One of the key ways of preparing yourself for contracting, is understanding the legislation surrounding it. Legislation knowledge will allow you to get a proper understanding for how it impacts you and your contracts. IR35 is tax legislation that is designed to combat tax avoidance by workers supplying their services to clients via an intermediary and is the number one topic of contractor conversation currently. There are many online resources that can help you further understand the IR35 guidelines and their consequences for contractors. After conducting research, you are still unsure about how it impacts you, always seek professional advice.
It is vital to realise that IR35 confusion will be entirely avoided by using an Umbrella Company to process your payroll. The umbrella employs the contractor and processes their payroll via PAYE with full tax and NI deductions made. This takes us on neatly to the next point.
#3: Limited Company OR Umbrella?
You must decide which payroll method suits your situation best, getting paid via your own limited company or an umbrella company. If you don’t like extra paperwork, want to minimize any hassle involved in contracting and are looking to avoid IR35 chaos, we recommend using an umbrella company. With our umbrella solution, our focus is on providing excellent customer service, ensuring you get paid on time and that you don’t end up with unwanted tax bills. We would recommend researching each route thoroughly and making a decision on what is best for your circumstances. We appreciate that you need a solution which meets your individual needs therefore we offer you a free no obligation consultation regarding your circumstances and how our umbrella solution can help. Give us a call on 0800 634 4848 or visit https://www.fpsgroup.com/find-out-more for your consultation today.