Managing your finances

There are a great number of new arrangements that kick into place when someone moves over from being an employee to becoming a Contractor.

A few of these are covered above but although Finances are a difficult thing to discuss with others, and there is a slight cultural norm not to discuss such matters in the UK, it is advised that what other people are doing in similar circumstances could be very important. These become relevant conversations, given the number of factors that are different and need to be positioned properly when you are getting established as an IT Contractor.

Professional Indemnity Insurance

In reality this is unlikely to be an issue unless you are offering services to the public or bidding on substantial contracts that require a team to be put together but often even for vanilla assignments where you will not have significant responsibility it can be the norm to be asked to have Indemnity insurance.

The rates for this can vary widely too and it is often best to see what group offers maybe available through the membership of a trade body.

The expense on Indemnity Insurance is an allowable deduction though against income/profit for the purposes of calculating taxes in the taxable period that it’s paid.

business man dreaming on a cloud. concept of big dreams


It’s now being considered likely that we will live longer and work longer than our forefathers and that the state cannot and is increasingly becoming more hesitant to guarantee citizens a guaranteed income later in life.

In fact, George Osborne has recently used the topic for political bait, stating that he cannot guarantee the current generation of pensioners the same level of inflation matching increases in their pension entitlement if we leave the EU as there is a fear that the tax take that he will have to distribute may fall if economic activity falls as a result of a winning leave EU vote.

It’s beyond this article to advise in this matter but there are generous tax allowances provided for pension contributions that you may allocate from your Contracting earnings.


Quite a number of Contractors over the past few years have taken advantage of the strong cash flow that come from contracting to invest in residential property; but did you know that you can also invest in Industrial and Retail property from your pension funds?

Finally, if you are invested in regulated pension funds you should from time to time consider the performance of that fund and its fund manager against benchmarks established to do exactly that. Switching costs to move funds to another provider could easily be covered in the medium term by finding a more competitively managed fund.

If you do feel that you could do better than your current provider a self-managed SIPP is another option. Monies can be transferred into this from existing Fund providers and tops ups made to this fund in the normal way from earnings with the associated tax breaks for doing so. You can then buy and sell shares and other assets for your pension under your own direction within this tax ‘wrapper’.