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How to become a contractor in the UK

Get more advice on becoming a contractor

If you’re new to contracting and want to know what a limited company is all about, you’ve landed on the right page. Below you’ll find information on contracting and all the various tax and pay structures available.

How do you start contracting?

First things first: You need to get work. You might get a contract job through your own professional or social network, advertising your services or through a recruitment agent. A contract in this context is an agreement to perform a certain job or task for a client over a certain period of time or until the job is complete.

Usually, a contractor is paid on completion of the task or at an hourly, daily or weekly rate. When securing work through a recruitment agent, you need to ask if the end client would be willing to employ your limited company or umbrella company prior to signing any contracts.

A contractor is not an employee

Contractors are specially recruited to complete a specific job or objective and this objective needs to be well defined by the end client.

Contractors often have a specific set of skills or experience that make them suitable for their role. Contracts usually last from 3-12 months, although they may be renewed if the task takes longer to complete than initially planned for.

Tax and payment structures for contractors

Because of the specific nature of the tasks that contractors perform and because of the short-term nature of many contracts, contractors often have more options when it comes to how they are paid. The most common options are:

  • Self-employment
  • Working through a limited company
  • Working through an umbrella company

Limited companies are the most tax-efficient option, as contractors can retain earnings, register for Flat Rate VAT, claim expenses and because company tax rates are lower than personal tax rates.

 

Our consultants can help you with any questions you might have about becoming a contractor in the UK.

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