New to contracting? Top tips for staying on your path to success

Congratulations on your new career in contracting! Whilst it’s an exciting time there’s plenty to get your head around, especially if this is your first time in self-employment.

But fear not! The experts here at SG Accounting have put together this handy blog to help you get you get to grips with the basics, and to know when and where to ask for help with the more technical issues.

Keep an eye on your outgoings

Spending to get yourself set up can quickly take on a mind of its own, and if you’re not organised it can be easy to lose track of what you’ve spent. And as you can imagine, come tax return time this can make getting your records together a complete nightmare! So make your life easy by keeping a record.

First things first, ensure you have a business bank account set up. Be sure to only ever use it for business purchases and payments, so that you’ll have a clear record of what’s going in and out of your account (your contractor accountant will love it too!)

Keeping a record of receipts is a tedious task, but sadly one you’ll need to do if you want to claim back your business expenses. But it’s not all scraps of paper in a shoe box under your bed, many contractors record their expenses and receipts by using spreadsheets or apps. These allow you to input the receipt’s information or take a picture of the receipt to keep a record, which your accountant will also have visibility of. Here at SG all our clients are able to enjoy using FreeAgent as part of their all-inclusive monthly fee which includes a handy scan-and-go feature where you’re able to take a photo of your receipts. You can find out more about what else is included in our services here.

Understand your tax responsibilities

Whilst it’s your accountant’s job to understand the technical side of your accounts and keep you on the right side of the taxman, it’s beneficial for you to have a basic understanding of your responsibilities. Being aware of your tax, National Insurance Contributions (NICs) and personal allowances for the current tax year means you’ll be more alert to the possible tax savings you could be making. Knowing this can mean the difference between taking home more of your contractor pay by making the most of the tax reliefs that are available to you. You should also have an understanding of the role dividends and salary play when paying yourself.

As a contractor you’re not expected to have a detailed knowledge about accounting, and that’s why appointing a specialist contractor accountant is so important. Leave the technical stuff up to them, freeing you up to do what you do best.

What is IR35 and why do you need to understand it?

In a nutshell IR35 is a form of tax legislation designed by HMRC to identify contractors who claim to be self-employed, when in actual fact they are disguised employees. This basically means that a contractor who is claiming to be self-employed and therefore reaping all the tax benefits associated with being so, is actually employed and therefore should be paid accordingly.

Whenever you start a new contract, both the contract and your working practices are reviewed to determine whether you’re found ‘inside’ or ‘outside’ of IR35. If found ‘inside’ you’ll be considered working as an employee and will be taxed as such. Be found ‘outside’ and you’re entitled to pay yourself through a mixture of dividends and salary, plus take advantage of all the available tax benefits for Limited Company contractors.

IR35 can be a minefield and it’s easy to get a little lost within the legislation, especially when it has such an enormous effect on your overall contractor take home pay. At SG we include IR35 contract and working practice reviews as standard in all of our all-inclusive monthly services, so leave it up to our accountants to advise on your status, leaving you with one less thing to worry about.

Why is it so important to have the right accountant?

A general accountant will be just that, they’ll have a general understanding of all things accounting related, but not necessarily specialist knowledge when it comes to the unique and sometimes intricate needs of Limited Company contractors. You’ll want to have your accounts in the hands of a specialist who’s up to date with the latest legislation, keeping an eye out for any ways in which they can increase your take home pay, whilst keeping you compliant.

Make time to look after yourself

Going it alone and stepping away from the security of employment can be daunting, and it’s easy to spend every waking minute building your business and chasing contracts. But whilst it’s important to have your next contract lined up, it’s also really important to make sure you’re taking care of yourself.

Ensure you have clear work and home life boundaries, especially if you’re currently working from home, to ensure one doesn’t blend into the other. If you thrive in social environments, maybe find a quiet coffee shop or shared working space whereby you can plug in and switch off to get the work done. Whatever environment and working space that works for you best will be your most productive, so make the time to find out what that is, and in the long run it’ll pay off.

Also ensure you’re protected with Professional indemnity insurance. Included at no extra cost in all of our packages, our insurance is provided by Hiscox, so as an SG client you can rest easy, knowing both your accounts and insurance are completely taken care of.

Just starting out or thinking about it? SG can help

We help contractors just like you every single day. Our team of director-level accountants are on hand to take you through every step, ensuring everything is set up for your first contract. Whether you’re ready to join us or just want to have a chat through your options and how we can help you, get in touch today.

We look forward to helping you get started on your exciting new contracting career!