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Switching to contracting work may feel daunting if you’ve always taken the permanent hire route. That needn’t be the case, provided you’ve done your research and have made the preparations needed to work as a contractor.
What’s include in this guide:
Thinking about going solo?
The work of contracting can open a wealth of new contracting opportunities and a completely different approach to how you work.
The Association of Independent Professionals and the Self-Employed (IPSE) recorded almost 4.2 million individuals operated as self-employed in the UK in 2024, contributing £366 billion to the economy. The highest proportion of self-employed people work in the construction and building trades, proving how popular contracting continues to be.
Frequently asked questions about contracting
If you’re thinking of making a move to the world of contracting, you’ll no doubt have a lot of questions. We’ve included the typical ones we get asked below.
Is contracting right for me?
Becoming a contractor may feel daunting - leaving the comforts of a permanent salary and employee benefits but taking the leap can really pay off. Contractors typically enjoy higher rates of pay on average compared to permanent workers, so it’s worth doing some research online to compare contract and permanent pay for your position.
Going freelance also grants you more independence when it comes to choosing when and where you work.
Will there be opportunities to progress?
One of the main perks of being a freelancer is the fact that you get to be your own boss. You determine which projects you want to work on, and what your work schedule will be.
If you’re currently employed in a business where you can’t see any opportunities to progress, contracting may be the key. Operating through your own company is one of the best ways to take control of your career and build up your experience on larger scale projects to help boost your CV and secure a more senior position.
How will you get paid if I switch to contracting?
There are several ways you can work as a contractor, through Pay As You Earn (PAYE), Limited Company and through an umbrella company.
Pay as You Earn is typically managed by the recruitment agency who you will contract through to work for client. They’ll manage your tax, National Insurance and pension contributions, so you don’t need to liaise with HMRC.
If you choose to work through an umbrella company, they will be responsible for managing your tax and usual deductions on your behalf.
Whilst opting to work through a Limited Company means you are responsible for managing your own tax and finances, including holding the relevant insurance policies to compliantly operate. Limited company contractors bill clients for their services as a supplier and can recoup essential expenses such as training accreditations and business mileage but will need to be assessed for their IR35 status, which we’ll come on to shortly.
You can find out more about these in our related blog article.
How does HM Revenue & Customs perceive contractors?
It’s vital to understand that HM Revenue & Customs have strict regulations on how they perceive contractors with regards to UK tax obligations.
Previously a small proportion of individuals moved to a contractor role to benefit from the tax breaks of not working directly for an employer – whilst continuing to unofficially work for the company and receive similar benefits to the company’s direct employees. To combat this kind of behaviour (known as ‘disguised employment’) HMRC’s IR35 legislation was launched, giving clear guidelines on how a contractor should operate to show they are not working directly for a company.
The End Client, typically the company you as a contractor is delivering the work for, is responsible for determining the IR35 status for your temporary assignments. If they decide the assignment is too similar to how a directly employed worker undertakes their role, then the assignment will be deemed Inside IR35 (also referred to as ‘in scope’) - requiring tax and National Insurance contributions to be deducted from all payment you receive for that assignment. For assignments outside of scope, it remain your responsibility to manage your tax obligations.
Don’t be put off by IR35 though, your clients will need to evaluate your jobs on an assignment-by-assignment basis, so not all of them will necessarily be Inside IR35 it will depend on the specific arrangements for each.
What’s clear though, is that anyone consider contracting should have a good understanding of IR35, known as off-payroll working, to ensure you understand the working conditions and contractual terms that govern IR35 status determinations.
Sounds daunting? You can find out more about IR35 here on our website.
What will I need to consider financially?
You’ll need to identify all the additional expenses you’ll need to pay out of your contracting income. Fixed costs such as overheads, telecom services, comprehensive insurance and accreditations should be factored in. You may also want to think about additional benefits to support you in the future - a private pension as well as financial protection to cover your mortgage if you were to fall ill. As well as preparing throughout the year in readiness to pay your tax bill.
Think about how you’ll manage your finances if you have any calendar months where you haven’t secured contract work – consider building up a contingency fund as you work that you can fall back on if needed during quieter periods.
Legislation prevents us from providing any advice, but independent support is available to you including the Institute of Financial Accountants who can help you find accredited accountants in your local area.
Will I need insurance cover?
As a contractor, you’ll need to take out insurance. While at first it may seem like an unnecessary cost, taking out the appropriate insurance could save you thousands in the long run. As well as providing cover, having the right insurance in place could help you find more work, as most clients only look to hire fully insured contractors.
There are hundreds of insurance companies who can assist you with this; here at NRL we work with Kingsbridge who can provide discount for individuals contracting through NRL. Get in touch with our team to find out more.
Will there be a demand for my services?
As a contractor, it’s important to understand what the market for your skills is like. A number of factors such as the strength of the economy or the location of the roles can also influence the rates you charge and work available, so you’ll need to do some research.
Job boards like Indeed, as well as recruitment agency websites are a great way of monitoring contracting roles that match your skillset to gauge how regularly they are required.
Social media channels such as LinkedIn and Facebook can also help you get an idea of the kind of salaries you could expect to earn, and which areas of the country companies are recruiting in. Search for local area groups and sector specific job vacancy groups and keep track of the average contractor salary rates being offered.
Job search tip:
“Use LinkedIn, or keep your own list of connections, as you liaise with clients on projects. Often your connections will change jobs or move projects, so keep an eye on these career changes and use them as an opportunity to reach out and chat with them.
As a contractor, you will sometimes move from job to job quite quickly. Make sure you build up a network of the people you meet, whether they’re managers or fellow contractors. By making yourself known to a large network of people you will grow your own reputation in the industry, and you’ll leave a lasting impression for future work opportunities.
Have a look for LinkedIn groups that match your skills and technical sector in your region – these can also be great places to network as well as understand what the local market is like for contract opportunities.
Most importantly though, don’t be afraid to ask for recommendations on LinkedIn, these will help show what you can deliver.”
Tim Millbank, Team Leader in NRL’s Wigan branch
What will the work-life balance be like?
The great thing about being a contractor is that you can choose when you want to work, making it easier to achieve a happy work-life balance. With wages typically higher than working directly for an employer, contractors often don’t need to work 12 months of the year to take home a wage that can support their family and lifestyle.
You may also want to consider how much you’re willing to travel for work. If you’re happy to widen your geographical work radius, or work away for short periods of time, you could secure larger contracts or attract more competitive contractor pay rates.
How do I find contracting work?
If you’re interested in making the move to contracting, then your first step should be to register with recruitment agencies that support the industry sectors you are interested in.
You can submit your CV through NRL’s website to be included in searches our recruiters make when resourcing for contracting roles, so it’s important to get your CV out there to start generating work opportunities.
Job search tip:
“As well as building up connections in the roles you work, make sure you’re also connecting with your Recruitment Consultants.
They’ll often be able to tell you about the demand for roles in the area, discuss any pending roles they may need to recruit for, or give you some advice on the geographical areas to base your search on.”
Nicola Ferguson, Team Leader in NRL’s Egremont branch
Preparing to go freelance
Hopefully you’ve found the information in this guide helpful in supporting your move into the contracting world, and you’re now ready to take the leap.
Below you’ll find some helpful next steps.
Set-up your payroll compliance – including setting up a Limited company if needed
Take out insurance policies – ensuring you have the right level of protection
Update your professional accreditations – do you need to secure more?
Consider joining a trade organisation – to stay up-to-date with your industry
Register with recruitment agencies – including reaching out to talk to recruiters
Consider additional training – are there any certifications that will provide more work opportunities?
Update your CV – refocus your previous experience on the projects you supported and skills you displayed
Update your LinkedIn profile – then connect with previous colleagues and recruiters
Supporting candidates with contract roles
You’re in good hands with NRL, as we help thousands of contractors each year secure work with our clients, and our recruitment teams are always on hand to help you with identify your next contract role.