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Five contracting mistakes to avoid
Posted Jul 30, 2012
So many contracting guides focus on the attributes one needs to get ahead as a contractor. Given that many of the best lessons in life come as a result of errors, we're compiled an initial list of five common mistakes you should avoid as a contractor.
1. Saving for a rainy day
Contracting is an uncertain business. When the economy is weak, the competition for contract assignments is greater, and you may be 'on the bench' for extended periods of time. Many veteran contractors have found out the hard way that you shouldn't go on a mad spending spree when your first contract invoices are paid. Always put a proportion of your earnings aside to keep you going during the lean times. Put future tax savings into a business deposit account for safekeeping, and also to increase your chances of earning some interest on your deposits.
2. Spending your company's money
If you are a limited company contractor, your finances are distinct from those of the company. You should never declare dividends unless the company has sufficient retained profits to pay for them. If you do, your dividend could be illegal. You should check with your accountant if you are unsure how much profit there is available to withdraw legitimately.
3. What is IR35?
If you choose not to establish your IR35 status, and take steps to ensure your contracts fall outside its scope, you could be significantly financially worse off as a result. You should have your contracts reviewed by professional IR35 contract review providers, ensure that your working practices match those described in your contracts, and take out IR35 insurance in case you are selected for an IR35 status enquiry.
4. Keeping in Touch
Unlike permanent IT professionals, contractors must make a concerted effort to keep in touch with colleagues past and present. With the onus for finding work falling squarely on your shoulders, you will often find that spending time on networking pays off in the end - especially when most contract openings are offered to contacts of people working on IT projects before they end up on the job boards. Networking has never been easier, given the popularity of social media sites - particularly LinkedIn.
Those training courses you enjoyed as a permie will be a thing of the past when you become a contractor. You alone are responsible for ensuring your skills are up-to-date, and you're aware of any industry changes. Fortunately, much knowledge can now be built online, for a fraction of the costs associated with more traditional training courses. Some contractors even travel overseas for heavily discounted training opportunities (and have a holiday at the same time)!
- Professional Indemnity Insurance - Essential cover from Hiscox
- Helix Management Ltd - Up to 90% retention. Same day payments
- Parasol - the UK's favourite umbrella company
- Qdos - IR35 experts - Providers of low cost contractor insurance
- Contractor Finance - up to £30,000, when you need it
- Umbrella Company - 12,000 contractors can't be wrong!
- SJD Accountancy - UK's largest Accountants to Contractors
- Together we're stronger! - Join PCG, representing contractors
- ClearSky Accounting - specialist support for contractors
- Free IR35 & Tax Review - Call ICS on 0800 195 3750
- InTouch Contractor Accounting - Clients love our personal service
- Contractor Mortgages - Based on your daily rate alone