We’re big fans of a good list here at Kingsbridge HQ. It’s lucky for us, then, that the lovely people over at Intouch Accounting have put together the top ten tips for new IT contractors. Read on below.
Moving away from permanent employment and into contracting can be a confusing time for an IT professional. As well as the holistic adjustments, you will want to understand the finer details before you make the leap. From decisions regarding operating under an Umbrella Company or setting up your own Limited Company to how taxation works to the benefits of contracting, it can be an overwhelming time – but it can also be a great opportunity to adapt in the industry and hone your skills.
As an IT professional, the decision to branch out into contracting doesn’t come easy – and whether you’re certain it’s the route for you or still making your mind up, we’ve put together a list of the top 10 tips for new IT contractors to help you on your way.
- Set up: Umbrella vs going solo
In this ever-changing industry, more and more IT contractors are opting to operate through their own Limited Company – rather than contracting through an Umbrella Company. While an Umbrella Company works as a ‘middleman’ between the contractor and the client or agency, a Limited Company puts you in complete control. As the director of a Limited Company, you are in charge of your business and therefore responsible for setting up a business bank account, managing taxes and invoices. While this may seem challenging, it’s a more tax efficient option – giving you a higher take-home pay.
- Get to grips with taxes
We might be three months into the new tax year but it’s never too late (or too early) to get to grips with the latest changes or what’s to come. Taking control of your finances can be one of the most challenging parts of becoming a contractor, particularly if you’re used to having your taxes handled for you – so make sure you understand how taxation will affect you before you make any final decisions.
- Pay attention to IR35
There was hope that the newly elected government would overturn the IR35 legislation, but it remains firmly in place and needs to be understood. When it comes to the IR35 rules, it’s not uncommon for contractors to ignore them and hope for the best, but this can be financially detrimental in the long run.
- Choose a professional accountant
Establishing your own Limited Company can seem like a daunting prospect and one of the first steps to ensuring you’re operating effectively and legally is to hire an accountant. Professional contractor accountants are experts in assisting IT contractors with setting up their Limited Companies – from working out tax liability to your monthly salary, they help you manage the financial stress.
- Set your rates
As an IT contractor, it can be tempting to be flexible with your rates and offer different deals for different clients – however, this can lead to unnecessary hassle and loss of revenue. By setting your rates from the start, you can not only ensure everyone is getting a fair deal, but also plan out your expected income.
- Sell yourself and your service
From ensuring you have an up to date CV to your attitude when dealing with clients, the way you handle your approach to contracting is a reflection of the service you are providing. Word of mouth is still an effective way to gain business and build up a strong portfolio, and this all starts with the way you present your services.
- Keep making contacts
IT contracting is notoriously competitive and to be successful in the industry, you’ll need to find ways to stay ahead of the competition. When you start out as a new contractor, your list of connections will become your lifeline – and over time, you will come to rely on existing clients. To ensure you keep turning a profit and work never runs dry, set aside time to regularly network with new people – including other contractors.
- Understand the changes
The election might be behind us but with the Conservative’s pledge to find ways to support self-employed people still ringing in our ears, we’re left wondering what’s in it for contractors. In this faced-paced industry, understanding political change and how it affects you is integral to your success as a contractor. Failure to keep up to date with changes in the industry will weaken your credibility and leave you vulnerable.
- Prepare: dry spells and busy periods
While IT contracting is a great business to be in right now, as we’ve mentioned above, the industry is constantly changing. As technologies progress, develop or sometimes even fail, it’s important to be prepared. In periods of uncertainty, you can use the unexpected ‘free’ time to your advantage – by carrying out research, networking and improving your services. While work can sometimes be limited, there will also be instances where your time is stretched. You can prepare for this by establishing your time availability at the start of each month and ensuring you don’t take on more work than you can manage.
- Manage your income
A previous post on this site covered some essential contractor financial products and discussed some of the difficulties contractors face when it comes to lack of sick pay, pension schemes and paid holiday allowance. As a contractor, it’s imperative that you prepare for the inevitability of sick days and holidays and manage your finances accordingly. Make sure you don’t plan work in for periods when you expect to be unavailable. This will help you avoid letting clients down and losing contacts.
So whether you’re about to embark on the path of IT contracting or you’re already there and need some advice to help you on your way, these handy tips should set you on the path for a successful contracting career. At Kingsbridge, we understand the specific requirements an IT contractor has, and we’ve tailored our policy package to provide the most comprehensive insurance cover that the modern independent IT professional could need.
If you’re seeking comprehensive contractor insurance cover, speak with the team at Kingsbridge for an easy to understand, fuss-free service that will give you the peace of mind that you’ve got experts looking after you.
Call our friendly team on 01242 808740 and we’ll be happy to discuss your requirements. Alternatively, apply for a quote online to gain access to cover instantly.
Paul Gough is Managing Director at Intouch Accounting – providing specialist contractor accounting services to skilled contractors across the UK.