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Moving from a permanent role to contracting

Posted by: Intouch | 26.01.15

Intouch Accounting

Moving from a permanent role to contracting

If you’re thinking of moving to contracting there are a number of practical factors to consider before making the move from a permanent role. Considering these points will help make your transition to contracting life easier and smoother from the start.

Leaving your current organisation

Make sure you confirm the notice period with your current organisation. In some cases this can be months, or there may be a stipulation that the individual cannot work for similar companies for a specified time.  Knowing these details helps avoid contractual issues with leaving your current employer. The majority of contract work requires the contractor to be available to take up their position within a few days of interview or a couple of weeks at most. This means you’ll need to make sure that you can be available at short notice before applying for contracting roles.

Choosing to set up as a Limited Company or using an Umbrella

You will need to decide whether you want to set up your own contractor Limited Company or to get paid using an Umbrella company.  This is an important consideration as there are several tax differences between these options which directly affect your net take home pay.

At its simplest the key difference between the two is in the amount of tax you pay on your contractor income. If you use an Umbrella company you are effectively an employee of the Umbrella with National Insurance Contributions being payable on your entire contractor pay. If you set up as a Limited Company contractor you can choose to reduce the amount of taxable salary you pay yourself and take the majority of your remuneration as dividends from your company. The overall result is that your post-tax take home pay will usually be higher. To give you an idea of the tax savings you might make as a Limited Company contractor take a look at the Intouch Contractor Take Home Pay Calculator tool.

If you decide initially to use an Umbrella company then change your mind, the Intouch team can help you easily and smoothly make the switch to becoming a Limited Company contractor.

Finding contracting work

Initially, registering with relevant contracting agencies, uploading your CV onto CV databases for recruiters to find, searching job boards and mining your contacts are good ways to find opportunities and keep up with what’s available.

As a contractor this is an on-going process. Over time you’ll build relationships with job agencies, clients and individuals which will make this easier.

Checking your IR35 status on contracts

Usually the aim is to have a contract which puts you outside IR35, meaning you’re operating ‘in business on your own account’ while working for the client. If your status is seen to be inside IR35 you are considered by HMRC to be a disguised employee of your client. This means you will have to pay more tax on the income.

Have every contract checked by your contractor accountants or lawyer before signing.  It’s better to be safe than get into difficulties with HMRC at a later stage. Find out more about IR35 by reading our frequently asked questions.

Networking and marketing yourself

Professional looking business cards are a start, but it’s helpful to be a proactive networker to keep your contacts growing and your portfolio on show. There are many groups and organisations which hold regular face-to-face networking events. Keeping your online profiles on LinkedIn and niche online communities active will also help to maintain your success.

If you decide to make the move you’ll be joining thousands who enjoy their contracting life with the variety and interesting challenges it can bring.  Our New to contracting guide will help you every step of the way or you can contact us to discuss your options.

If you’re considering moving from a permanent position over to contracting and thinking about work, take a look at our latest blog on How To Find Contract Work, where we list the top 5 tips on how to find contractor work.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.