For those who are considering becoming a contractor in 2021, there are some things that you need to know. There are still benefits to being a contractor, even in the post-pandemic world, but many things have changed since 2019. With IR35 just around the corner, you need to know what is required to make it as a contractor in 2021.
Even with the conjoined issues of the pandemic and IR35 changes in play, contracting has still been on the rise in recent years. In the UK, there are 5 million self-employed people right now. Demand for contractors is on the rise again now that the world has figured out how to do business in a pandemic.
In a survey from last year, 90.8% of contractors still say that they do not regret becoming a contractor. For those who are looking at becoming a contractor, there are some factors that you need to keep in mind before you leap.
1. Incorporate: Incorporate your company. In this model, you will work through your limited company, which will offer many tax benefits. You will need to register your company through Companies House and make sure that you take the time to get that done correctly.
2. Get a Business Account at Your Bank: You will need to have a bank account for the company. Make sure that you pick a bank that offers up the right balance of benefits for a small business so that you aren’t missing out on perks connected with having a business bank account. Make sure you think about fees and interest before you sign up.
3. Make Sure You Are Prepared to Pay Tax: With IR35 on the way and many other changes to the tax picture for the self-employed, make sure that you know what you will need to pay in taxes before you engage in any contracts. If you are not sure about the taxes you will owe, get an accountant to help you do the right thing.
4. Make Sure you Understand IR35: The changes to the contractor tax situation with IR35 in 2021, means that you will need to be certain that you understand your status and how the new tax picture will affect your engagements. Your status will be determined by the medium or large businesses that you engage with. If you want to avoid IR35, you will only work with small businesses in the private sector.
5. Get Business Insurance: Between the pandemic and HMRC, you will want to have insurance to protect yourself from the various risks that make contracting a challenge for those who are not prepared. Many contractors will have more luck winning contracts post IR35 if they can show that they have proper insurance, which protects them and their client.
6. Learn to Market Yourself: You will want to have a marketing strategy, and you will need to promote yourself effectively. You will have to promote yourself in the new contracting world. Things will be very different after IR35 is rolled out, and you will need to be able to sell yourself to engagers efficiently and successfully to make contracting worth your while.
Contracting is a very worthwhile option for many people who are ready to promote their skills and who can afford the proper insurance. Don’t give up on contracting just because of the pandemic or the challenges IR35 will offer. As things settle down in 2021, being a contactor will still be better than working as an employee. Make sure that you don’t miss out just because of the changes that are in progress.
