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When moving from permanent to contracting, the change might be a little scary. However, there is no real reason for the fear. This article is a step-by-step guide into contractor-hood, hopefully making the process of change a little easier for you.

1) Find a Contract. Make sure your CV is completely up to date, engineering it with keywords and facts to suit the style of contract job you are after. With so many job roles and opportunities out there, make sure you utilise the internet by registering with as many online job sites as possible to maximise your chance of finding a contract.

2) Know you IR35 Status. IR35 legislation was introduced by the government to make sure that contractors have not taken on a work ethic which may be similar to that of a permanent worker. You might be taking home less home pay if you fall under IR35 legislation. Your recruiter should inform you as to where you are inside or outside of IR35.

3) Limited or Umbrella? Normally contractors choose to work through an umbrella company if working with short term, lower value contracts earning less than £25,000 a year. These contractors will normally earn between 60%-65% of their contract. Accountants for contractors will tell you that working for a limited company is the most efficient, and you can potentially take home about 75%-80% of your total contact worth. Administrative work-wise there probably is about 15 minutes a month on average that you will have to deal with, however, you will benefit from hiring a contractor accountant to deal with this plus help you with any other issues.

4) Appoint an accountant for contractors. Getting hold of an accountant who is experienced in the field of dealing with contractors is very helpful. A contractor accountant will give you advice, taking you on your journey through your contracting career.

5) Forming a limited Company. Using a contractor accountant will be able to help you with forming your own limited company. Any good contractor accountant should be able to supply you with the forms that you need to do so, which is a quick process enabling you to start trading that very same day.

6) Create your Business Bank Account. An experienced accountant for contractors will probably inform you that opening and setting up a business bank account is essential. Being a contractor, you need to keep your personal account separate to your business one – since your limited company is seen and treated as a separate entity. Therefore, all your business transactions should go through your business account, funnily enough.