Should you be a contractor or permanent employee?

Contracting has many benefits, there is no denying that, but it isn’t for everyone. The life of a permanent employee and the added security that comes with it is something that many people struggle to leave behind.

As with anything in life, there are advantages and disadvantages to both routes. Featured below is a list of the positive and negatives of contracting; they should help to paint a clearer picture as to which route you should take.

If you would like to start your career as a limited company contractor, out team of expert accountants can incorporate your company in 24 hours and help you get to grips with the life of a contractor.

Advantages of contracting

There are a number of advantages to choosing a career as a contractor and we have summarised the key points below. Additionally, we have a jargon-free guide on the benefits of contracting that you may find useful.

  • The average contractor working through their own limited company takes home around 75% to 80% of their income.
  • Contractors can earn twice as much as permanent employees carrying out a similar role.
  • You are able to claim expenses that are solely for business use. These can be offset against your company’s turnover to reduce your tax bill.
  • You are your own boss and have the freedom to work when you choose.
  • You’ll be able to work with a variety of different clients.
  • Gone are the days of waiting for you boss to approve a last minute holiday request, as you are now your own boss you are in charge of when you can take holiday.

Disadvantages of contracting

The biggest thing that puts people off contracting is the uncertainty that you are never guaranteed work, so this is something that you need to take into consideration. However, with thousands of people choosing to become contractors each year, it doesn’t seem to be much of an issue and there are countless things that you can do to help improve your chances of winning that next contract. To find out more, read our comprehensive page on finding work as a contractor.

There is a certain amount of extra responsibility that comes with being your own boss. You need to make sure that you keep ontop of your paperwork so that you are prepared each time a deadline is approaching with HMRC or Companies House. However, this isn’t something you need to worry about too much if you have a good accountant working with you. 

Contracting through a limited company

As we have touched on already, setting up your own limited company doesn’t have to be a complex process. Our qualified accountants can register your company for you and have it up and running in as little as 24 hours.

In addition to setting up your company, you’ll also need a good accountant to help you with tax planning and to manage things like the submission of you company accounts. Whilst you are legally allowed to do these things yourself, they can be extremely time consuming if you have no accountancy experience, not to mention that if you file returns late or incorrectly you could find yourself being issued with a penalty from HMRC.

Ultimately most contractors choose to appoint an accountant for peace of mind and to allow them to focus more of their time on their day-to-day duties. We offer a low-cost, all-inclusive, fixed-fee package for just £55 per month, which includes:

  • Annual accounts submission
  • Management information
  • Corporation tax calculations and submissions
  • Monthly payroll and RTI returns
  • Quarterly VAT returns
  • Annual returns for Companies House
  • Personal tax return for the director
  • Manage your finances online with Free Agent

To find out more about our services or to appoint us as your accountant, contact us and one of our friendly experts will be happy to help.