Becoming a Contractor in 2022

It’s reasonable to assume that if you’re reading this, you’re either thinking about becoming a contractor or have already taken the plunge. In either regard, it was a smart decision. Contracting offers a variety of benefits, including the ability to work for whoever you want, when you want, earn more money, and avoid office politics. Because of the numerous benefits of contracting, the number of self-employed persons in the UK has risen to over 5 million in recent years. Contractors, who provide firms with flexibility and a wide range of specialised skills, have been in high demand.

So, now that you’ve verified that contracting is a viable option for millions of people, and you’ve decided to pursue it, what do you need to know before you get started? In this guide to contracting in 2022, we’ll go over everything that you need to know.

Getting Incorporated

First and foremost, you must incorporate your business. Contractors typically work through their own limited liability corporation, commonly known as a Personal Service Company (PSC). This is expected to be the vehicle by which you supply your services to clients as a contractor. Working with a PSC provides a number of advantages, ranging from reduced liability to more tax planning options. It might be a little bit confusing if you’ve never registered a business with the Companies House before. There is, however, a lot of assistance available, and allnumbers can even handle the limited company creation procedure for you be sure to visit www.allnumbers.co.uk

Opening a Business Banking account

Every limited corporation, being a separate legal entity from its directors, needs its own bank account. Many banks now provide solutions specifically designed for contractors and small companies. However, it’s important to do your research before deciding on a bank; elements to consider include interest, charges and fees, internet banking, and the time it takes to be set up. If you’re not sure where to begin, get in contact with one of our team members today.

Considering Tax

You’ll need a strategy for dealing with your new tax obligations. Contractors must pay Corporation Tax, VAT (if they are VAT registered), and Income Tax, which is personal tax owing to HMRC depending on the money you have taken from your company. It might be intimidating to keep track of your funds, calculate tax payments precisely, and submit them to HMRC on time, especially if you’re new to contracting. Because of this, the tax system can be complicated, you might wish to hire a contractor accountant to handle everything for you.

Understanding IR35

You’ve probably heard about IR35. After being implemented to fight ‘disguised employment,’ it’s been a sore point for contractors for over the past 20 years. It exists to prevent contractors whose engagements resemble employment from paying tax as a corporation rather than an employee. IR35 reform was implemented in the private sector on April 6, 2021. Contractors will no longer be responsible for assessing whether their contract falls within IR35 (employed for tax reasons) or outside IR35 when the final hirer is a medium or big business. Instead, this obligation will be passed on to medium and big businesses.

If an assignment falls inside IR35, the contractor’s tax duty will be transferred to the person who pays the contractor’s Personal Service Company, if all legal responsibilities are completed along the route.

Contractors who work for small private businesses are exempt from the change and will continue to be responsible for determining their IR35 status and paying the required taxes.

Protecting your business

There are a variety of factors in 2022 that are likely to contribute to economic instability, ranging from the Coronavirus Pandemic to the war between Russia and Ukraine. Some argue that the uncertainty benefits contractors, since firms choose to hire contractors to help them navigate rough periods. However, there’s no doubt that as a business owner will not want to leave themselves exposed, especially in this day and age. It’s for this reason that contractors frequently insure their businesses. Contractor insurance, whether it’s IR35 insurance, professional liability insurance, or a public liability policy, might prove to be a wise investment, as well as providing you with peace of mind.

Marketing your services

Every company, especially in what is turning up to be a competitive economy, needs a successful work strategy. However, there are a variety of strategies to sell your services, including creating a website, establishing a social media presence, writing blogs, contacting your current network, and approaching recruiting agencies.

What counts most, regardless of your marketing strategy, is that you are proactive and commit time in growing your company. If you want to learn more, we’ve got a variety of different articles and blog posts to help you out at www.allnumbers.co.uk