If you've already been offered a contract or not sure how to become a contractor or if its worthwhile.... then you're in the right place. If you're new to contracting, and perhaps not heard about us before, Virtue Accounting, are a national specialist firm of accountants - our team has vast experience and has helped thousands of people like you get started over the years. Below you'll find a brief summary of your main trading options.
Our guides section includes useful backgound on running a business and allowable contractor business expenses, but it would be our job to take away most of this accounting hassle for a low fixed monthly fee. A 10 minute call on 0800 121 6016 to talk to one of our accountants will make the whole thing clearer - listening properly to your future plans and answer all your questions; offering some sensible advice and pointing you in the right direction.
Most contractors are attracted by the fexibility and higher earnings potential of being self-employed. Having made the decision to become a contractor one of the first decisions is to decide how to trade.
Choosing the Best Contractor Trading Route
There are three main trading routes if you're considering going contracting - Soletrader, Umbrella Company, own limited company. Which option you choose comes down to your own circumstances and intentions for the future.
Sole-trader - If you're simply dipping you toe in the water and undertaking small projects (perhaps initially at the weekend) then soletrader is likely to be the best route for you. The set-up and administration costs are lower, you would be able to off-set expenses and then be taxed on your profits. It will be necessary to register with HMRC as self-employed and complete an annual self-assessment return.
Working as a sole-trader may not be an option for a larger full time project direct with a UK Company or via a recruitment agency. It is usual for UK companies to only enter into a business-to-business contract with another limited companies (i.e. Umbrella or your own Limited Company); few will deal with sole-traders because of the potential PAYE risks if they're not declaring their own taxes properly.
Umbrella Company - You would effectively become an employee of the umbrella company. The contract for the project would be between your client/agency and the umbrella company itself - you would simply be the worker. As an employee of the Umbrella Company you would be able to claim certain direct expenses such as travel cost. After the Umbrella Company's fees the remaining monies would be paid as salary under PAYE rules.
Working as an umbrella employee is best suited if your contract rate is low and contracting is short term with the intention to return to permanent employment
Limited Company - Best suited to long term, high-earning contractors where the contracts will be with agencies and UK companies. Limited company potentially provides the most flexibility, credibility and earnings potential for a serious long term contractor.
A limited company can claim expenses and business running costs, and there is the oppotunity to declare dividends if you are genuinely self-employed. The UK government has introduced several pieces of legislation intended to stop contractors who are effectively nothing more than employees of their end-client from avoiding tax and national insurance. It is important to understand and form an opinion on IR35 and Section 660 and Income Shifting legislation.
Becoming a Contractor - Read our guides and talk to Virtue
We'll be able to advise which trading route is best help you set up and structure your business SAFELY whichever trading option you choose:
- Hear a totally honest assessment of your trading options
- Understand what’s really best for you – not just whatever gets you to sign up
- Hassle-free business set up with proper structuring
- Accountants to watch your back and guide you through the common mistakes and pitfalls
- Proactive ongoing accountancy and tax support
Put your details in our contact form, or press some buttons and talk to our accountants. We'll make no charge for advice or getting your business set up and structured correctly.
Make use of our comprehensive business expenses; running-a-business; IR35; salary and dividends; Section 660 and Income Shifting guides, which can all be found in our guides section. Virtue are a national specialist firm of accountants, we've helped thousands of new start-up businesses, self-employed and contractors begin working for themselves.