Contracting is a flexible alternative to permanent employment that allows individuals and companies to work together for a fixed period.
A contractor is a professional, usually in IT, who provides skills or services for a specific time frame. They can be self-employed, work independently or run their own limited company. An umbrella company or agency can also employ contractors, and they will pay the contractor and their taxes.
Contracting is a way for professionals to offer their skills and services to companies without committing to permanent employment. It allows for flexibility and can be managed independently or through an agency.
The Difference Between Contractors and Employees
Contractors have more freedom in their work than employees. Contractors can decide whether to accept or decline work, if they accept a contract, they must finish the work. If the client offers more work after that, the contractor can choose to take on the extra work or not. This means contractors can choose their hours.
Contractors also set their own terms for their contracts. This includes how much they get paid and when and where they do the work. If the work doesn't need to be done in a specific location, the contractor has the freedom to decide when and where they do it.
Contracting through a limited company
If you're an experienced contractor, setting up your own limited company can give you more control over your finances and save you money on taxes. However, keep in mind that it also means you'll be responsible for following tax rules, such as reporting payroll, filing year-end accounts, paying Corporation Tax, and VAT. Directors of limited companies must do these things to stay compliant.
Contracting through an Umbrella Company
When you work through an umbrella company, you get the best of both worlds. You get the freedom and flexibility of contracting, as well as the security and many benefits of being an employee. This makes it an attractive option for many people, particularly those who are new to contracting.
One of the advantages of working through an umbrella company is that you don't have to worry about the IR35 rules. This is because you become an employee of the company. So, if you work through an umbrella company, your Income Tax and National Insurance will be taken care of by the company.
Moreover, working through an umbrella company grants you access to all the rights of a company employee. You'll receive sick pay, maternity/paternity pay, holiday pay, and even access to a pension auto-enrolment scheme.
By choosing to work through an umbrella company, you can enjoy the benefits of contracting without having to worry about the administrative hassles that come with it.
If you're a contractor looking for a mortgage, Super Contractors can help. We specialize in securing mortgages for contractors across the UK. Our mortgage advisers are experts and understand the challenges contractors face.
For more information, feel free to speak to our expert contractor mortgage advisers on our freephone number 0800 211 8700 or fill in our online enquiry form.
Please note, if you fail to keep up with your mortgage payments, your property may be repossessed.
The information contained within was correct at the time of publication but is subject to change.
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