So you’re starting out as a contractor and you’re eager to get off on the right foot? We know this is often a big leap of faith for many, but it’s also an incredibly exciting venture full of new opportunities.
Whether you’re making the switch from traditional employment, or diving into the world of self-employment for the first time, there are a number of things to consider. That’s why we’ve put together an essential guide of key aspects to help you hit the ground running.
Ready to unlock success in the dynamic world of contracting? Read on…
Choose the right operating system
Prior to officially setting up your business, you need to figure out the best business structure for your needs. For example, do you want to operate as a sole trader, or a limited company? This will depend on your personal circumstances.
To help you make the decision, here’s an overview of your options:
● Sole trader – A sole trader is a self-employed individual who owns and operates their business, allowing for easy startup and the option to file a Self-Assessment Tax Return at a later date. But being a sole trader means you’re personally liable for your business’s banking and legal matters, and your personal assets can be at risk.
● Limited company – This is most suitable for contractors who are deemed outside of IR35. Operating as a limited company means you’d be your own legal entity, with the opportunity to claim business expenses through your Personal Service Company.
● Umbrella employment – Umbrella contracting offers contractors the freedom and flexibility of self-employment, while providing access to employment rights, protections, and benefits. It’s a starting point for contractors who are not ready to establish their own limited company, or for assignments classified as inside IR35.
Line up your expenses
Losing sight of your costs is easily done if you don’t keep track of them, and you could miss out on optimising your tax position. Outlining your expected expenses is crucial, and an effective way to maximise your take-home pay and reduce your tax liability. You can do this by looking at costs for things like insurance, raw materials, software, equipment, and more.
Then, collate these expenses, either manually or by using a spreadsheet or accounting software, and make sure you’re diligent with the information so you can forecast accurately.
Strike a work-life balance from the start
Being a contractor can be a tough gig at times, and individuals may struggle to balance their home and work life. While enthusiasm is required, being too eager early on can leave you drowning when things really take off. After all, everyone needs time to recharge their batteries, no matter how committed they are to their job.
Prioritising your work-life balance helps you to avoid burnout, maintain your physical and mental wellbeing, and strive for success in your field. So, make sure you allocate time for yourself to relax, enjoy your favourite hobbies, and meet up with friends and family.
Show yourself support
Now you’re out on your own, you need to be your biggest fan. And though you’re new to the contractor gig, you aren’t new to working or bringing value to projects. Promote yourself and highlight your skill set, making sure you don’t settle for subpar day rates just to get yourself started. Recognise your worth from the very beginning, and set high standards for your customers to meet.
By respecting and valuing yourself and your abilities, you’ll set a strong foundation for your contracting career. Remember, confidence attracts opportunities, that’s why your mindset and self-belief is really going to matter if you want to be successful in the long run.