What is a Contractor?

If you’ve landed here, then chances are you’re considering self-employment. Perhaps you’ve been thinking about contracting so you can take full control of your career. Maybe you’re facing redundancy and want to explore options other than conventional employment. You might have just graduated and don’t want the 9-5 life. No matter your reasons, working for yourself can be incredibly rewarding. As contractor accountants, we know all there is to know about contracting, here are some of the factors you should consider.

So, what is a contractor?

The dictionary definition of a contractor is ‘a person or firm that undertakes a contract to provide materials or labour to perform a service or do a job’. Simple enough to grasp, but how does that apply in real life terms?

Well, a contractor can either be:

  • A worker (if they work for a client through an umbrella company, the umbrella is their employer, not the client)
  • Self-employed (if they’re a sole trader or have a limited company of their own)

What sets a contractor apart from an employee is that they have significantly more control over when, where, and how they work. As well as who they work for. They have a contract for services (self-employment), rather than a contract of services (employment), and aren’t protected by employment rights, meaning they aren’t entitled to holiday and sick pay or a pension scheme.
Contractors can also have their contract terminated at any time. However, as a contractor, you do receive certain tax benefits to account for this lack of safety net, which helps you operate with more tax efficiency.

Is a contractor a temp?

Not quite. It’s important to understand the distinction between a contractor and a temp. Especially if you’re placed as a contractor through an agency. While both can be paid via an agency, temps are still controlled by the client. They’re expected to operate from a client’s office, are supervised in their daily work, are assigned a manager and are usually given training. None of the above should apply to a genuine contractor.

What are the pros and cons of contracting?

There are a number of benefits to being self-employed. There are also a lot of uncertain factors that cloud the decision too. Contracting isn’t a good fit for everyone, but is it right for you? Let’s start with the pros.

Being your own boss (and setting your own rates)

The most common reason people go it alone is to shrug off the traditional employer-employee relationship. Being your own boss allows you to control your work hours and your creative direction. You can also set your rates, and you are in the driver’s seat of your career. There are no employee benefits like organised training, but you have room to expand your skills and, theoretically, the sky’s the limit.


Once again, this comes down to the ability to manage your own time. When in a conventional job, you may work 9-5. If your day’s tasks are done before then, you’re given more tasks. If you rattle through your duties as a contractor, that time is unapologetically yours.

It can also be difficult to focus for 8 straight hours a day, particularly if you work best early in the morning or late at night. Contractors can work when they feel most productive, helping them work more effectively and efficiently.

Creative freedom

As a contractor, you have complete freedom to decide which projects you take on, the finished work you submit, and how you present your services to clients. Working for yourself allows you to be versatile and will enable you to develop your ideas from concept through to finished product – a satisfying 360 process that you rarely get when working for someone else.

Inevitably, some challenges stem from being entirely responsible for your own income. Let’s take a look at the cons of contracting:


One of the biggest worries for the self-employed is the uncertainty of income month to month. Contracting means being fully responsible for how much you earn, so it’s advisable to save some money, especially for the first few months while you get into the swing of things.

That said, income shouldn’t be a worry once you have built a solid client base. However, it could take some time to gain this client base. It’s also common to struggle with late-paying clients (or clients that don’t pay at all), so ensure you have them sign a contract with an explicit payment clause before starting a project.

Handling your accounts

Completing your own tax returns, tracking expenses and overheads and working out profit can sound intimidating to anyone that isn’t an accountant, so, understandably, it would factor into your decision.

If you hire a specialist contractor accountant, like QAccounting, from the word go will put you in the strongest position, not just for tax efficiency and compliance, but to advise on business growth opportunities too.

Understanding IR35

IR35 is the name for HMRC’s off-payroll working rules. These rules are coming in to help catch and make sure so-called ‘disguised employees’ pay broadly the same tax and National Insurance Contributions (NICs) as an employee would.

The IR35 legislation is undergoing a reform on April 6th that changes the rules significantly, and any contractor providing their services through a limited company should be aware of what the legislation means. It’s well worth reading up on what IR35 is, how it could affect you and get a feel for ways reform can be managed.

Contracting is the future of work

Despite a backdrop of economic uncertainty and anxiety-inducing IR35 reform, the self-employed community has thrived in recent years. Almost 15% of UK workforce now work for themselves – nearly the same amount of people who work in the public sector – and those numbers are only growing.

IPSE’s latest study showed that the number of self-employed people in the UK is the highest it’s ever been (a whopping 5 million), despite the looming changes to the off-payroll rules, an epidemic of blanket IR35 status determinations and Brexit.

There’s also an increasing focus on carbon neutrality that self-employment allows for, a better work-life balance and a culture of changing jobs more frequently than any previous generations, all of which lends itself perfectly to contracting.

Self-employment may not be for everyone, but it’s certainly the way the UK labour market seems to be shifting.

With over 20 years’ experience in supporting contractors, QAccounting is one of the UK’s leading contractor accountants. Offering a range of trusted accountancy services, including IR35 contract reviews through our partner, Qdos Contractor, we are rated 9/10 by contractors. To learn more about our accountancy services, please request a callback.

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