Contracting in 2021: how to survive the new normal 

The challenges of 2020 have been felt by workers everywhere and contractors and freelancers are no exception. With five million self-employed people in the UK, many have been left in limbo as the pandemic put contracts on hold and saw some cancelled altogether.

While some of the self-employed were able to receive support from the Government through the Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme, others fell through the gaps and have looked to adapt their businesses to ensure a sense of positivity and optimism about the future.

A recent survey from SJD Accountancy showed more than 70 per cent of contractors and freelancers plan to continue contracting for at least the next three years, with 62 per cent saying they’d recommend the career path to others.

This resilience amongst the industry won’t be enough to ensure survival alone. A clear strategy, knowledge and a willingness to change business practices will be vital for sustaining a contracting career in 2021, which looks set to be another challenging year for the economy.

Here, Joanne Harris highlights four things to keep in mind when it comes to boosting your pipeline of contracting work in 2021. Joanne is technical commercial manager at SJD.

Be flexible when it comes to taking on contracts

Before the pandemic, contractors working in niche areas was very common, but the landscape has now changed and the need to be flexible and apply skills widely is more important than ever.

In practice, this means being aware of your industry and the opportunities within it. For example, an IT Contractor working purely in coding could widen their portfolio to include website management, expanding their scope for potential new contracts.

Being flexible isn’t limited to the type of contract either, as it can also include the sector. While many contractors work exclusively in the private sector, the public sector can contain lots of contracting vacancies and shouldn’t be overlooked.

When searching for public sector opportunities, considering the relevant frameworks could be a promising idea. There are very thorough tender processes, but building relationships with recruitment agencies and consultancies already on frameworks could enable contractors to work on public sector contracts without having to go through the formal application. The process isn’t guaranteed to win you more work, but as frameworks can run for as long five to ten years, it may be well worth pursuing.

Build for the future with greater contract clarity

With so many industries hit hard by the pandemic, building up your resilience as a contractor for the year ahead is crucial to keep a steady flow of contracts coming in.

In 2021, the first step has to be preparing for the IR35 reforms, which come into effect on 6th  April 2021. If your relationship with a large or medium sized end client resembles that of employment, or your end hirer believes it does your contract may be deemed inside IR35. If this happens, you’ll be subject to PAYE t income tax and National Insurance deductions in the same way an employee.

To ensure your contracts remain outside of IR35, it’s essential to have conversations with clients early, as from April 2021 it with become the  responsibility of medium and large end hirers to determine the IR35 status of contracts. If you contract with a small end hirer, you will retain responsibility for assessing IR35 status

To confirm whether a contract is inside or outside of IR35, end clients must issue a Status Determination Statement (SDS), which becomes a legal document as of 6th April 2021. Some may have already received SDS documents from clients already, but these will be valid from April only if they meet all legal requirements and should be reviewed before the deadline.

However, IR35 status can be difficult to determine, and the best course of action may be to have your contracts reviewed by an accountant or an IR35 specialist who will need to look at both the written contract and crucially the working practices.

The sooner you’re able to clarify IR35 status with clients, the less you’ll need to worry about your contracts come April 2021.

Use furlough to further your skills

For some contractors and freelancers with limited company status, the CJRS may be the best option to maintain some form of cash flow during the pandemic.

With the scheme set to continue until the end of March 2021, furlough will continue be a lifeline for some, and can be used as an opportunity to upskill.

The rules of furlough strictly state you cannot work while using the scheme, with only two types of activity permitted: your statutory duties as a business director, and training.

This presents contractors with the unique opportunity to be able to dedicate their time to training and upskilling, which at a time of increased market competition, could prove highly valuable.

It could also prove financially viable, as any training courses undertaken can be claimed for as a usual business expense. However, there are restrictions to the type of course that can be claimed for. It must be related to the trade of the business, and focus on improving existing skills and knowledge, rather than the acquisition of new skills. For example, an IT Contractor could claim for a Google training course, but not any training in a different sector such as catering.

Despite tough times, self-employment will prevail

There’s no doubt that the self-employed have been hit hard by the pandemic, and the effects of it will still be felt in 2021. Fortunately, the UK’s self-employed are by nature an adaptable workforce with a talent for finding ways to survive and this is already being demonstrated.

From our own research, we know 70 per cent of contractors remain committed to working for themselves for at least the next three years, with nearly 30 per cent planning on another decade in the job.

Concerns about coronavirus, understandably, remain high but contractor resilience is very strong. Whether you’re newly self-employed or have been working for yourself for many years, staying alert to your industry’s needs and keeping on top of your contracts will give you the best possible chance of succeeding in the year ahead.

Despite the pandemic, millions are still choosing to be self-employed for good reason. As a career offering more flexibility, an increased work-life balance, and a better wage, it’s clear that choosing to work for yourself will continue to be a popular career choice long after coronavirus.

Partner Contractor Accountants

Last updated: 21st April 2023