1 February 2024

How to Become a Contractor: Step-by-Step Guide

Career Advice Recruitment Advice

It can be hard to know where to start when becoming a contractor, especially a successful one. We’ve put together a step-by-step guide to help.

10 Steps to Consider When Setting Up as a Contractor

If you are looking to become a contractor, it is important to know and understand the type of work involved.

Working as an independent contractor is different from working for an employer. As a contractor, you are in charge of your own career and have the flexibility to work the hours that best suit your lifestyle.

However, no job comes without its challenges and there are some drawbacks to a career as a contractor, such as limited employment benefits (things you would usually get from being permanently employed) and having to seek out opportunity to get hired as a contractor.

Discovering how to become a contractor can help you start a new career, increase your earnings, and find a comfortable work-life balance.

Learn how to become a contractor by following our step-by-step guide, crafted by one of our contractor recruitment specialists here at ARM.

Step 1- Research the Regulations and Responsibilities Surrounding Contractors

When you become a contractor, you will have responsibilities that you may not have  as an employee, so it is important to research the regulations you will be expected to adhere to. Some regulations to consider include taxation, legal status, and employment rights.

Understanding the regulations and responsibilities of a contractor can help you determine whether contracting is a good option for you.

Step 2- Be Prepared to Leave Your Previous Role

As your client portfolio grows and you find you’re getting hired as a contractor more frequently, you should be prepared to leave your current job. As an independent contractor, you will likely take on multiple clients and projects at the same time. To ensure you have enough time to spend on contract work and make a good impression on clients, expect to move on from your full-time role.

Step 3- Consider Your Tax Position and Understand IR35

If you want to become a contractor then it is important to note that contract workers are responsible for paying their own taxes and understanding IR35 tax compliance. The IR35 tax rules are designed to ensure companies do not pay less tax by disguising full-time employees as contractors.

It is important you get IR35 tax rules right as HMRC regularly investigate companies to find out if they are in breach of regulations. If you are found to be in breach of IR35 regulations, HMRC may hand you a hefty fine. 

Step 4- Decide Whether to Join a Limited Company or Join an Umbrella Organisation

When becoming a contractor, you can decide to create your own limited company or join an umbrella organisation. Each presents unique benefits and drawbacks so it is essential to consider both of your options.

Joining an umbrella company is often considered to be the simpler option for contractors in the UK while setting up your own limited company is more tax-efficient and can improve your take-home earnings.

Step 5- Register Your Limited Company

If you decide to start your own limited company, you must register with Companies House and HMRC. Once you have registered, your company will officially be ‘on the books’ and you will receive your certification and taxpayer reference. You can register a new business with Companies House by post or online. To register with HMRC, apply online within the first three months of trading. Once this has been completed, you’re ready to start getting hired as a contractor under your limited company’s name.

Step 6-Set Up Your Bank Accounts and Hire an Accountant

Setting up the right type of bank accounts helps make tax returns straightforward and ensures compliance with IR35 tax rules.

Hiring a specialist accountant is also a great idea to ensure finances and tax rules are set up correctly, accounts are kept in good order, and good compliance.

Step 7- Build a Good Contractor CV, Portfolio and Online Presence

To attract clients and projects, consider building a CV or portfolio to showcase your specialist skills and experience. Our top tip is to keep your CV brief and tailored to the type of clients and projects you want to secure and work with. You may also choose to promote your work online via a website, which is a great strategy in getting hired as a contractor!

Step 8- Start Attracting Your First Contract Work

To start your career as a contractor, you first need to source clients. This can be achieved through word of mouth, an online presence, and even recruitment agencies, like ARM: contract recruitment specialists. As a contractor, there is a great opportunity to grow your network and contract base by building a positive reputation within your industry.

Step 9-Get Insured

Before you get started, make sure you have adequate business insurance to protect your limited company from the financial risk and nature of contract work. If you choose to become part of an umbrella company, make sure you look at your employer’s liability insurance to ensure you are protected while at work.

Step 10- Begin Working as a Contractor

Once you have registered your business and sourced a client base, you can finally get to work as a contractor. Still not sure whether becoming a contractor is for you? Here are some frequently asked questions about being a contractor.

Also explore our contractor frequently asked questions.

Why Choose Us?

Since 1996, ARM has worked to understand the people we work with and provide the best possible recruitment experience.

Our recruitment experts are specialists in identifying hidden talent and have significant experience in their field. Supporting you every step of the way, we strive to match your talent with the right role for you.

Get in Touch Now

If you are considering a career as an independent contractor or are looking for a contract worker, get in touch with ARM today to see how we can help.

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