Becoming a Contractor in 2021


You’re here because you’re thinking about becoming a contractor or are about to take the leap, right!?

The advantages to contracting are very desirable from choosing who you work with and what hours you work while earning as much as you want and escaping the traditional office environment. This is why the number of self-employed people has skyrocketed in recent years to above five million, representing 15.3% of the employment market.

With this in mind, we wanted to offer you a digestible, quick, and easy guide on taking the first steps to become a contractor:


1. Form your Company

Contractors usually work through their own limited company, this is also referred to as a Personal Service Company (PSC). This type of formation will be the company you provide your services to clients through.

The PSC tends to be most popular for contractors as it gives you similar benefits to that of a permanent employee such as limited liability, better opportunities for tax planning and employment rights – sick pay, holiday pay, maternity and paternity pay, and a workplace pension.


2. Open a Business Account

Naturally, if you’re forming your own limited company, you will need to open a separate bank account. In today’s business climate there is a wide range of banking products designed with contractors and SME’s in mind.

We would always recommend carrying out some research first – create a shortlist of all the banks who offer products for contractors and SME’s – then compare;  interest rates, charges and fees, online banking accessibility, and how easy the registration process is.


3. Taxation

As a contractor, you will now need to manage your own tax and ensure you’re compliant with UK legislation. You will need to pay corporation tax, VAT (if registered), income tax, and national insurance contributions.

In other words, you will need to make sure you keep accurate financial records, possess knowledge or understanding on how to submit tax returns, or failing that employ an accountant to do bookkeeping and submit annual accounts for you, which is a costly undertaking.


4. Understanding IR35

You have probably heard IR35 mentioned in relation to contracting, we won’t go into too much detail here as you can find out more via the IR35 section of our website here.

In a nutshell, IR35 is a term used to describe two sets of UK tax legislation designed to identify contractors and businesses avoiding paying the appropriate tax by working as ‘disguised employees’.

Rather timely as we mention in our recent blog post Are You Ready for the New IR35 Changes?’, there are changes afoot from 6th April 2021. 

The changes mean, if you provide services to a public sector or medium / large-sized private sector client:

  • You should receive an employment status determination from the client, along with the detail on why this determination has been made
  • You can then dispute the determination you receive if you disagree

Naturally different rules will apply if:

  • You don’t receive an employment status determination from the client
  • Provide services to small clients in the private sector

It is known to be a complex piece of tax legislation and we recommend you seek advice or enlist the services of an IR35 specialist.


5. Insurance

Working self-employed as a contractor limits the level of security you may have in a permanent employment role, therefore insurance is important to have. As you’re providing professional advice and services to your clients, if this advice or service causes issues then your client may want to pursue a small claim against you in the courts.

This is not designed to scare you as even the most experienced and skilled contractors make mistakes, after all, we’re only human. If you have insurance in place it can protect you as a contractor from these types of claims, covering the compensation and legal costs.

You will want to look at the different types of insurance to see which best suits your business security needs:  IR35 insurance, professional indemnity cover, public liability policy, contractor insurance.

The above is food for thought when starting out on the road to becoming a contractor, it can be daunting but the benefits far outweigh the initial start-up process. Once you’re set up you have freedom financially and personally.


Be a Contractor Today

Evolve CS Group is a first-class umbrella contracting company provided by top-rated professionals.

Contact us at 0203 744 1229 or email us at and start your journey today with Evolve CS.