As the “rat race” gradually becomes less popular, an increasing number of skilled people are choosing to become independent contractors. This decision not only allows for a more free and independent lifestyle, it also increases earning capacity, with income directly linked to work output. And, with the Government’s recent promise to review and replace IR35 legislation, contractors might soon also benefit from a fair tax structure.

Is a Limited Company the way to go?

One of the decisions facing independent contractors is whether to set up a Limited Company or working through an Umbrella Payroll Company. Both have distinct advantages and either option can work well. 

Scott Brown from 1st Contact Accounting believes that those who fall outside of IR35 might benefit most from setting up a Limited Company: “People are put off by the huge amount of monthly and annual paperwork a Limited Company requires. But what they don’t realise is that going through a professional accounting firm is cost-effective and makes the process much easier!”

There are many tax benefits to setting up and running a Limited Company. You can, for instance, claim back on a wider range of expenses, including accountancy fees, travel costs and services and the equipment needed to run your business.

Another advantage is the ability to register for the flat rate VAT scheme, which allows you keep some of the VAT you receive from your clients. You also have complete control over your finances.

“Be sure to partner with a reliable accounting firm from the onset, as this is the only way to ensure your accounting and tax matters are always under control.” says Brown.  

“1st Contact Accounting provides accounting services specifically for contractors and can assist you with the hassle-free setting up of your Limited Company. The other option of course is to investigate working through an Umbrella Company like 1st Contact Umbrella. This is often the easiest option for first time contractors and for those who might go back to permanent employment after a brief contracting period.

Whichever option you decide is best for you, it’s always a good idea to get as much advice as possible before going on your own. While this lifestyle offers many rewards, it’s not easy to begin with. But with the right support, you can take the leap and succeed!

If you’re tired of the 9-5 lifestyle and would like to be an independent contractor, visit www.1stcontact-accounting.co.uk for more information or to find out about a free consultation.