If you are thinking about working as a freelance contractor, you have made a great decision. You will be able to enjoy many perks of being self-employed. However, there are certain limitations and you have to know them before you make your decision to work as a contractor.
Contractors are different in many ways when compared to employees. They work at their schedule and they can choose their own place of office. Moreover, contractors can work from home without giving up on their productivity. They can change their lifestyle the way they want without worrying about being at office at a certain time. If someone feels great about working during night, it will not be impossible when working as a contractor. Similarly, contractors do not have to bind themselves to any mutual obligation since a contract with a client will never contain mutuality of obligation.
Being a contractor is great as long as you do not have to face its evils. Although the increasing number of contractors is forcing the government to make the right changes, contractors are still having some problems when it comes to tax and borrowing money.
Working as a contractor requires diligence while setting up your workplace. Always pay attention to the privacy of your workplace in addition to its silent environment. Although you can work from anywhere, you will have to make sure that you are working from your home office at most times. It is the place that you have prepared for work and that is where you can increase the productivity of your business.
Contractors will have some problems with tax since they will not be always able to keep their contracts outside IR35. However, contractors can seek the help from a professional and avoid all the problems with tax. When choosing a tax advisor, be sure to check out credentials and his or her experience in the field.
Contractors can also take help from an umbrella company to reduce their tax and administrative responsibilities. An umbrella company provides an employment cover to contractors thus helping them to focus on their work while leaving administrative hassle to employer i.e. the umbrella company. These companies will provide an easy-to-use online system where contractors can submit their timesheets along with expenses. The umbrella company will send invoices to clients and expense report to HMRC. There are numerous other benefits of working through an umbrella company. Let us look at some of them.
- Contractors will be able to enjoy numerous employment benefits such as sick pay and maternity leave.
- An umbrella company will provide stability to contractors with multiple short-term contracts. Since all the assignments are covered under one contract of employment, contractors don’t have to worry about each such assignment individually.
- An umbrella company will offer professional advice, tax help, and references for financial services. This can help contractors a great deal especially when they need to find loans, mortgages, and contractor pension schemes. Majority of umbrella companies have a full portfolio of similar services in addition to being an umbrella provider.
- Umbrella companies help contractors to claim expenses through a simple system. Contractors will submit their expense claims along with their timesheet. The umbrella company, acting as an employer, will process these claims.
- Umbrella companies use PAYE (Pay As You Earn) to deduct tax and NI contributions. This can take a huge burden off contractors’ shoulder who always seem to be struggling with tax and other deductions, often making a mess of it.