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Office Hours: 9am to 5.30pm

How to Become a Contractor in the UK

Operating as a contractor is a life-changing business decision for many. But with so many hoops to jump through, it can be daunting to know where to start with such as positive change to your professional career.

So, what steps are involved in becoming a contractor in the UK?

What key steps are involved to become a contractor?

While the process of becoming a contractor may at first seem complex, taking a methodical, informed approach can help ensure that you not only make the right decision, but also that you take advantage of every opportunity available to you.

Though these will change from sector to sector, some key steps include-  

1. Assessing your situation: Before you decide to start operating as a contractor it is vital that you look at your current professional situation and confirm why you are specifically making a shift. This should involve talking a look at your domestic situation, prospects, and any dependents that you have. While working as a contractor carries greater flexibility, freedom, and financial reward – it does add an element of risk that simply may not have been there before if you are operating in a salaried role. Before you pull the trigger on the process, make sure that you have factored in as many variables as possible and you are making the move with complete confidence.

2. Quitting correctly: Contractors are, by definition, highly experienced in their chosen field and will be confident in their ability to secure contracts (or have them lined up) before they leave. Despite this, it is essential to make yourself available for work but also leave your previous business on good terms if you ever need to seek their help in the future again. Ensure that you hand over all projects correctly, fulfil your contract of employment in full, and only start your search in earnest once you have finished your time with the business.

3. Acquiring a Contract: Once you have left your former place of employment, you can seek out employment through two key approaches. Given the level of experience and interconnection with contractors working in sectors, directly approaching companies and seeking work or making your availability known can be a solid start. However, while this can help ‘put the word out’ and allow you to touch base with former partners, this is extremely time consuming and can result in excessive resource expenditure. An alternative approach is to seek work through a recruitment agency, who will be able to provide you with a role in a business that suits your background – though the recruitment fees may prove to be substantial in the short and long-term.

4. Assessing your work: Once you have secured a potential contract, it is essential to fully review the terms and understand your place within the IR35 system. This can significantly reduce your net income and consulting with an accountancy professional can help ensure that you are making the right choice for your individual needs. While it is possible to sift through this yourself, getting a full review requires significant knowledge of employment law and legislation that is specific to your sector.

5. Agreeing payment: If you are happy with the contract, you will be able to confirm how payment will be handled for your work. This will allow you to follow two paths. You can either choose to incorporate and become a shareholder in your own limited company. Alternatively, you can set up an umbrella company, acting as a useful intermediary between you, your employer, and the agency that is receiving your payment. Once this is confirmed, you can take action and set up your required entity. While working as part of a limited company may help to maximise returns, many contractors choose to set up an umbrella company.

6. Engaging an Umbrella Company: If you decide to work as part of a limited company you can skip this step. But if an umbrella company is right for you, you can work with a professional PAYE umbrella company to quickly and efficiently set up your company on your behalf. This allows contractors to act as the sole employee of the umbrella company which then enters into a contract with your chosen employer. Once your work is carried out, you will submit a timesheet to your umbrella company, which will then invoice the employer for hours tendered alongside any key expenses. Once the employer pays the umbrella company through PAYE and a pre-agreed umbrella fee is tendered, you receive a payslip like a normal employee, and you can enjoy your first paycheque as an independent contractor.

7. Signing on the dotted line: With all the elements in place, you sign your contract with your prospective employer. This should be reviewed in full before taking any action and confirm that it is for the contract of services, not a formal contract of employment. Once agreed, you will be able to start your new job and ensure your approach is optimised to achieve any goals you have set yourself for the years ahead.

What next?

If you want to learn more about how becoming a contractor can optimise your work or some of the key steps to take, our team at One Click Group is here to help. With specialist experience in working with contractors from all backgrounds, we will ensure that your transition is smooth and simple, allowing you to spend your time and energy where it is needed most.

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