When looking to make the move to contracting, there are a lot of different aspects to look into, from getting a contract, writing a contractor CV to actually forming your company and much more. But why should you move from permanent to contracting?
When most people start thinking about contracting, the most obvious benefits are the increase in pay, flexibility and work/life balance. SJD Accountancy has 5 reasons why you should make the move to contracting.
Contractor rates of pay can land anywhere between £250 – £1000 per day, depending upon your experience and industry. To find out an estimation of your daily rate, take a look at our take-home pay examples.
Contractors are paid a higher rate than almost all permanent employee’s because their skill sets are very industry-specific and help to fill a knowledge gap in the workforce.
Each contractor is different and the more experience you have as a contractor, the better your chances of commanding a higher daily rate. Their rate of pay is higher because contractors are flexible workers and most of the time only work on 3-6 month contracts.
As a contractor, you now know that you are taking home more from contracting than permanent however, how much of this do you get to keep? Well to answer simply, that all depends on how you operate and your personal circumstances, so it’s best to speak to an accountant.
The most tax-efficient way to operate is through a Limited Company as you can apply for the flat rate VAT scheme, which allows you to invoice out to your clients at 20 per cent and only pay around 13.5 to 14.5 per cent to HMRC.
Although contracting via an Umbrella Company is an option, it is much like the PAYE scheme. The Umbrella Company will act as your employer and once a contract is complete, will minus tax, NI (national insurance) and their fee before paying you. You will also be required to complete timesheets and expense details for the umbrella company.
One other main reason most choose a contractor’s life is the freedom and flexibility aspects to it. As a contractor you are in control of who what when and where when it comes to contracting – this can be satisfying and enjoyable for some. Contracting provides you with the opportunity to be completely independent, and changing contracts can actually be easier than changing jobs.
For most the best perk of contracting is the ability to take as much or as little time off as your want in between contracts, and if you chose to you could also work while on a sandy beach. Contracting usually provides you with more flexibility when it comes to negotiating rates of pay and contractual agreements.
Although working as a contractor can sometimes be quite a specialist due to your industry sector, there are lots of opportunities for you to learn and obtain new skill sets which may further enhance your future contracts.
It can also provide the footing to test out other sectors to investigate into widening your experience, whilst also providing a great insight into the variety of company cultures you can experience.
As you become more experienced, you will have built a reputation for yourself in the contracting world, particularly in your chosen industry. This means that you may find your services come highly recommended from previous clients.
And most importantly…
Most make the move to contracting for lots of different reasons but some make the move simply for a better work/life balance. According to SJD Accountancy’s most recent Contractor Attitude Survey, nearly three quarters (or 73%) of participants stated that contracting had a positive effect on their work/life balance.
With higher rates of pay being the top answer to why they became a contractor at 85%, a better work/life balance came in at 55% which had risen by 12% since 2012.