What are the benefits of contracting?
Regardless of what industry you are in, there are a number of advantages and benefits to becoming a contractor.
Below is a summary of the main benefits to contracting:
- Financial benefits: as a contractor your average rate can be double that of a permanent employee. Contractors are paid highly due to their skills and the flexible nature of their role, which is predominantly short-term.
- Greater freedom: contracting allows you to work when you want, where you want and for how long you want and changing contracts can often be far easier than changing permanent positions.
- Increased flexibility: contract roles have more flexibility with regard to agreeing working conditions and payment terms.
- Broader experience: as a contractor, you will have the chance to work across multiple projects and roles in many different companies, thereby increasing your own skill set and experience.
And if you choose to contract through a Limited Company, there are further benefits:
- More money: a Limited Company is the most tax-efficient option for contractors – by combining a low salary, high dividends and claiming all legitimate business expenses, you can maximise your take-home pay.
- Better tax planning: operating through a Limited Company provides greater tax planning opportunities.
- Claim for more expenses: you can offset all of your legitimate business expenses against your income to further reduce your tax liability.
- Limited liability: a Limited Company’s finances are separate from the personal finances of the owner.
However, there are a few negative points to consider:
- Finding contracts: you will be responsible for finding clients and ongoing contracts to maintain a steady flow of income.
- Negotiating terms: you will be responsible for negotiating your contract terms, which may not be something you are familiar with. In addition, contactor terms differ substantially from permanent employment terms (for example there is no holiday pay or sick pay). If you are a first time contractor, a specialist recruitment agency can assist you with all these legalities.
- Finance management: contractors are responsible for managing their own finances, including tax, VAT and NI. This can be time consuming, particularly if running a Limited Company – which is one of the main reasons the majority of contractors choose to outsource this to an experienced accountant.
There are many points to consider before you make the decision to start contracting. If you would like to talk through all the options, we can help you decide on the right structure to suit your individual circumstances.
Please contact us on 020 8108 0090 today for a complimentary no obligation meeting to allow us to maximise your tax savings and take-home pay.