Contracting is an extremely rewarding career choice, as it comes with numerous benefits that most permanent employees can only dream of having; and there are now more students than ever looking to start up their own businesses to both fund their education and to start on the career path…
It’s not hard to see why so many students are thinking of going self-employed, what with the benefits and the fact that contractors are currently riding through the economic storm. However, it’s also important to remember that the lifestyle choice comes with more responsibilities, such as having to organise your own finances and dealing with issues such as IR35, Corporation tax and National Insurance!
Why are students becoming contractors?
There are two main reasons behind the rising numbers of students looking to become entrepreneurs. There’s the fact that university fees and the additional costs have significantly risen over the past two years and they are protecting themselves against a shrinking jobs market.
Many universities are now encouraging students to go down the route of becoming self-employed, as they are aware that a degree on its own isn’t always enough to guarantee employment.
Benefits of contracting
Starting a career as a contractor has many advantages, mainly due to the fact that you are your own boss meaning you decide exactly which direction you want you business to go in.
Other benefits include:
- Being able to choose when you work, where and for however long you like. You can also choose to have as much time off as possible, instead of the standard few weeks in a year.
- Being in a position to claim all of your business expenses against your income to further reduce your tax bill.
- Average freelancer rates can easily be double that of a full time employee – sometimes even more.
- You can set your own rates, which may include being paid for every hour that you work. Also, you have the opportunity to work over time if you so choose.
- Being your own boss, therefore you are able to choose when you work, where and for however long you like.
- Taking holiday whenever you want, as you will not be in the position of having to juggle your days off around other colleagues. You can also choose to have as much time off as possible, instead of the standard few weeks a year.
Every contractor needs to be aware of the IR35 legislation.
It has been put in place to prevent people from trying to reduce their tax liability and National Insurance, by leaving full time employment and then returning to the same job immediately as a contractor working through their own limited company.
In order to fall outside IR35, you will need to show that you are working with the same level of responsibility, control and liability as other contractors.
If your contract is caught by the legislation and you are ‘inside’, then HMRC will view you as having the same benefits as a permanent employer, which means you’ll have to pay full tax and National Insurance contributions and won’t be able to claim certain expenses.
It can be extremely useful to have an accountant that specialises in your field so that they can fully explain the financial details involved with working as a contractor, such as IR35, Corporation tax and expenses.
Many successful contractors will use an accountant in order to manage their business for them once it takes off; it’s always a good idea to look around for the best contractor accountants, one who specialises in the sector, so that they can offer you the best possible advice that will suit you and your working practices.