Switching from permanent employment to contracting

So you’ve decided to leave your permanent job and become a contractor. It’s an exciting moment, and one you’ll look back on as a turning point in your working life, but it can be daunting too. That’s why we’ve compiled this step by step guide to getting started as a contractor.

Finding your first contract

Contractors offer their clients a way of accessing specialist skills and expertise that otherwise would not be available to them. This grants them much needed flexibility in a cost effective way, so temporary workers are, and will continue to be, in high demand.

The process for finding a contract is not so different to that for finding a permanent job. Start by contacting recruitment agencies who specialise in your field. If you already have the knowledge and contacts, you might also contact end clients directly.

Now that you’re working for yourself it’s also worthwhile building up network of previous clients, colleagues, industry professionals and anyone else who can help you secure new contracts.

Choosing the best working arrangement

The next thing you’ll need to do is decide how you’re going to operate. There are a number of things to consider. The first is your IR35 status. IR35 is legislation designed to prevent what HMRC call “disguised employment”. If you’re working in the Public sector, your end client will decide if your contract is caught by IR35. If you’re in the Private sector you’ll be responsible for making the assessment yourself.

Once you know if your contract will be inside or outside IR35, you need to decide if you’re going to operate as an umbrella employee, or as the director of your own limited company. There are other considerations, but generally we recommend umbrella employment if you’re inside IR35. If you’re outside IR35, the limited company route may be better for you. You can find a detailed comparison here.  

Appointing an accountant

Assuming you’ve decided to operate through your own limited company, this is the ideal time to appoint an accountant, as they could be of great help in getting your business up and running. However, you can appoint an accountant at any time. We recommend appointing a specialist contractor accountant as they will be best placed to advise you on:

  • Incorporating your company
  • Share structure
  • Opening a bank account
  • Choosing an insurance provider
  • IR35 status and finding a company to check your contract

Orange Genie Accountancy are expert accountants specialising in the contractor and freelancer market, and we’ll support you with the very best advice, tailored to your specific circumstances and goals.

For more information about how we can help you and your business, or to appoint Orange Genie Accountancy please call us on 01296 468185 or email us at accountancy@orangegenie.com.

Forming your limited company

Ideally, we’d advise you to form your company a few days before you sign the contract, but it can be the same day. The contract will be between your company and the agency or end client, so you’ll need your company name, registration number and certificate of incorporation before you start work.

Forming your limited company is a straightforward process. You can register online and it should be complete within 24 hours. If you register with Orang Genie Accountancy we’ll form the company for you. You might also like to read our advice on choosing a name for your limited company.

Opening a business bank account

Ideally we’d advise you to open a business bank account as soon as possible after your company is formed, because your agency or client will be unable to pay you until it’s open. The earlier you open your account, the less likely you are to have issues getting paid. You might consider opening a business current account and a deposit account. The company’s deposit can be used to plan effectively for future tax liabilities. You can find more information on business banking, here.

VAT registration

Depending on your circumstances, you might want to register for VAT. Your Orange Genie accountant will advise you if this is appropriate. It can take around six weeks to receive your VAT number, so your first few invoices may not include VAT. This is easily rectified once you have your VAT number by issuing VAT only invoices.

There are two possible ways register for VAT. With the standard scheme, you charge and pay VAT at the full standard rate, and claim back VAT on items that you buy through your company. Alternatively, with the flat rate scheme you charge VAT at the full rate and pay it to HMRC at a lower rate, but you don’t claim back VAT on purchases. Historically, the flat rate scheme has been the most popular route for the majority of contractors as they generally have few vatable expenses and it provided extra income for their company.

However, from April 2017 changes to the Flat Rate Scheme made it less attractive. The flat rate is now 16.5% for all businesses who fall into the definition of “limited cost trader”. This definition catches the vast majority of contractors. Your Orange Genie Accountant will advise you which option, if any, is best for you.

With an experienced specialist like Orange Genie Accountancy on your side, running your own limited company can be extremely rewarding. To find out more about how we can help you please call us on 01296 468 185 or email accountancy@orangegenie.com

Why Orange Genie Accountancy?

Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice.

We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email.

Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:

  • Unlimited accountancy support
  • Face to face meetings so we can get to know you and understand your contracting goals
  • Proactive contact
  • Director and employee payroll
  • Annual Return
  • Self-Assessment Return
  • A fully compliant service so you are safe in the knowledge that you are meeting your legal obligations
  • Access to the Freeagent Software, which is updated in real time so you can always see how your business finances are looking

​And much more, includingaccess to wealth management advice, IR35 reviews and pensions planning. 

If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com

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