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Contractor Resources & Downloads

Registering a Limited Company Guide

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Registering a Limited Company Guide guide

Limited Company Expenses Guide

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Limited Company Expenses Guide guide

How Will Brexit Affect Contractors and Independent Consultants

We take a closer look at the impacts of Brexit on UK contractors and independent consultants. Key areas discussed include tax, the transfer of personal data, visas and contracting opportunities.

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A Guide to Claiming Umbrella Company Expenses

We explain everything you need to know about claiming expenses as an umbrella company employee, including the SDC legislation, determining your SDC status, the types of expenses you may be able to claim for, record keeping requirements and more.

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Umbrella Companies Explained: FAQs for Contractors

If you're a contractor considering employment at an umbrella company, you'll probably have a number of unanswered questions about these providers and how they work. We've compiled a list of FAQs to help you get started.

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Ultimate Guide to Umbrella Companies

Learn all about umbrella companies in our guide for contractors. We explain the pros and cons of working with umbrella companies, umbrella company fee structures and how to choose an umbrella company.

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contractor insurance guide

What business insurance do contractors and freelancers need?

Here are the 6 types of business insurance you'll need to consider as a contractor or freelancer.

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contractor business guide

Contractor Business Services UK

We'll walk you through different business services you may need as a contractor and where to find them - alongside unique discounts.

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what business insurance do i need guide

What business insurance do I need?

We'll walk through the 6 types of insurance you need to consider when starting and operating your business.

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how to become a contractor guide

How to Become a Contractor

We'll walk through the steps you need to consider when becoming a contractor. From deciding on a company structure to setting up your profile on different platforms, here's your ultimate guide to becoming a contractor.

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contractor jobs guide

19 Places to Find Contractor Jobs & Roles

From consulting platforms to interim recruiter sites, here's 19 places where you can find consulting and contractor roles.

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take home pay calculator guide

Take Home Pay Calculator

Find out if you could be saving thousands with your take home pay.

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contractor accounting guide

Contractor Accounting Services

We provide the critical accounting and filing support you need as a contractor combined with world class technology to eliminate your admin.

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N/A guide

101 Stategies for Contractors during Covid-19

Here are 101 Things to Do to increase your network, operate efficiently, save costs and find other sources of income during COVID-19.

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Contractor & Freelancer Insurance Guide

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Contractor & Freelancer Insurance Guide guide

Business Banking Guide

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Business Banking Guide guide

Benefits of GoForma

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Contractor FAQs

There's a few routes to start working as an independent contractor in the UK. From finding work to setting up your business, we'll help walk through everything you need to consider.


What is a contractor?

A contractor is a professional that provides skills and services to a specific client under set terms. The terms can be for a set number of hours, a certain time frame or duration of a project.

A contractor is responsible for their own dealings and has discretion over the work they carry out.

What are the different types of contractors?

Contractors generally fall under two categories:

  • Worker/employee - where the contractor is employed by an agency or an Umbrella Company.
  • Self-employed - where the contractor works through their own entity as a sole trader or own limited company.

Contractors are not to be mistaken as temp workers who will be filling the boots of a permanent employee.

What is an independent contractor?

An independent contractor is another term to describe a general contractor who works for themselves (self employed) and operates through their own Limited Company.

Is a contractor self employed?

Contractors are self-employed individuals working as a sole trader or their own limited company. They can be 'employed' via an Umbrella Company however will not hold the same employment rights as a typical permanent employee.

Is a contractor an employee?

Contractors can be an employee of an Umbrella Company however will tend not to hold the same employment rights of an employee. Unlike employee's, contractors will have discretion over the work they complete and is responsible for their own business dealings.

How do I become a contractor?

Most people start contracting after they have already received an offer for a job that requires an independent contractor (typically paid on a day rate).

Others start when they have work opportunities outside of their current permanent role. We'll walk you through everything you need to consider and how to become a contractor below.

What are the advantages of contracting?

Flexibility - contractors have a lot more control over their work life often deciding when they work, where they work and how they work. Not only this, contractors have a lot more flexibility when it comes to managing their finances.

Increased earnings - contractors are often paid more due to their skillset and the flexible nature of their working relationships. Linking back to also having flexibility with their finances, they can use to this to their advantage, especially when working through their own limited company.

Greater development - often working with multiple clients throughout their career, contractors are exposed to a lot of opportunities to develop their skills and build on their experience in their area of expertise.

What are the disadvantages of contracting?

Uncertainty - Following the flexible nature of working relationships, contractors are never guaranteed work after the end of assignment or project.

Responsibility - Not only is it the responsibility of the contractor to find work, they are also responsible for their own finances.

Employment rights - As a contractor, you generally wouldn't find yourself holding employment rights that permanent employees benefit from.

How do I find contractor jobs?

Contractor jobs can come from a variety of sources but the main routes are:

You can read our full guide on 19 places to find contractor jobs.

Employing contractors

There's a few steps you'll need to consider with hiring contractors - we've put together a full guide to hiring contractors here.

Umbrella vs Limited Company Contractors

You may have to operate under an Umbrella company due to IR35 but if you have the option of deciding, it's generally more tax efficient to set up a Limited Company if you think you'll earn over £25k annually through the business.


What is an Umbrella company?

An Umbrella Company sits between the contractor and their client/agency.

The Umbrella Company employs workers on fixed term contracts and allows the contractor to operate on a PAYE basis as if they were a full time employee.

Advantages of Umbrella company

Statutory employment rights - falling closely in line with a permanent employee but on a short term basis, the contractor will receive employment rights.

Reduced admin - as the Umbrella Company will handle the contractors taxes and pay, this reduces the admin and responsibility of the contractor.

Disadvantages of Umbrella company

Less tax efficient - as the contractors taxes are dealt with at source via payroll, working through an Umbrella Company offers less tax efficiencies than if they were to work through their own limited company.

Less flexibility - as most things are handled for the contractor, they often have less flexibility over their affairs.

What is a Limited Company?

Speaking in broad terms, a Limited Company is a separate business entity that is controlled by it's investors and directors.

Advantages of a Limited Company

Tax efficiency - flexibility in tax planning as a director/shareholder of your own business allows for savings to be made in taxes.

Higher take home pay - in line with the flexibility a limited company offers, the personal tax rates paid whilst working through your own limited company as a whole tend to be lower than that of a sole trader or employee.

Limited Liability - with the nature of a limited company being a separate entity, it's owners hold limited liability meaning they have more protection over their personal assets.

Higher status - operating as a limited company gives your business a feel of professionalism and status among both existing and potential clients.

Disadvantages of a Limited Company

Increased responsibilities - As the director and shareholder of a limited company, there will be an increase in responsibilities and duties to take care of such as tax returns and business accounts.

Reduced privacy - Details of all limited company's, directors and persons of significant control are held on public record.

Higher fee's - The accounting duties of a limited company are more complex than some of the other contracting options available and so this often comes at a higher price.

When do I need a Limited company?

There is no clear cut time as to when you should start working through your own limited company. With other routes available (sole trader, Umbrella Company, etc.) it is always worth weighing up what is best for you and your circumstances. With that being said, if you plan to work as an independent contractor for the foreseeable future, opening your own limited company at the early stages can maximise your opportunities for reaping the benefits of having your own company straight away.

Umbrella vs Limited Company

We recommend weighing up the pro's and con's of each from the information above to see what's best for you however as a general rule of thumb, going Umbrella is best for short term contracting and starting your own Limited Company is best if you see yourself working as a contractor for a longer period.

How do I set up a Limited Company?

The setting up a limited company is a relatively quick and easy process that can be done directly with Companies House but there are some steps afterwards that can be a bit more fiddly.

Once your company has been created, the following documents must be completed and returned to Companies House to finalise the process:

  • Memorandum of Association – limited company name, location, business type
  • Form 10 – director’s names, addresses and registered limited company address
  • Form 12 – states the limited company complies with the terms and conditions of the Companies Act
  • Articles of Association – outlines director’s powers, shareholder rights etc. (this is often provided by the formations company that sets up the limited company)

Here at Forma we can assist with the full incorporation process and so get in touch today to find out more on how we can help you.

What do I need to do as a Company Director?

As the director of your own limited company, you are responsible for the running and management of the company. It is your job to make sure that key deadlines are met and information is kept up to date. Take a look at our guide on the responsibilities of a director for more information.

IR35 For Contractors & News

What is IR35? IR35 was designed to identify contractors and businesses which are fulfilling the role of a permanent employee (known as disguised employment). It works by looking at an individuals true employment status and ensuring the appropriate tax is paid.


What is IR35?

Introduced back in 2000, IR35 was designed to identify contractors and businesses which are fulfilling the role of a permanent employee (known as disguised employment). It works by looking at an individuals true employment status and ensuring the appropriate tax is paid.

IR35 Overview

When is IR35 happening?

Now. IR35 was originally introduced back in 2000 but is continuously undergoing changes (with the next major changes proposed for April 2021).

What does IR35 mean for contractors?

IR35 means that contractors will need to consider their true employment status when working on an assignment to ensure that the correct tax is paid according to their status. This is currently especially true for those working in the private sector (in the public sector, the contractor will often be told their IR35 status before the engagement begins).

What does IR35 mean for employers?

Currently, in the private sector, the responsibility for IR35 lies with the contractor themselves. In the public sector however the hiring organisation will need to determine the IR35 status of the contractor before the work begins. Changes to the current IR35 legislation proposed for April 2021 will see this also apply to most hirers in the private sector too.

Contractor Accounting

Get help with your accounting as a contractor.


What can accountants help with?

The goals for accountant's is to help businesses with tax and compliance duties whilst providing strategic advice to save money and time, allowing the business to focus on it's core activities.

Everyone knows that accountants will complete tax returns and accounts but the very best accountants will go one step further in ensuring the very best for the business.

How do I find an accountant?

In today's times, you can find an accountant pretty much anywhere you go whether that's walking down the high street or browsing the internet. Take a look at our guide on choosing an accountant to get some tips on what to look out for when choosing an accountant.

Contractor accounting pricing

Like with all service offerings, you can find contractor accountants at pretty much every price point. Some accountants will charge by the hour, some by piece of work or like ourselves, will offer a fixed monthly fee covering everything you will need in one clear package.

Best contractor accounting software

Software can go a long way in assisting businesses and accountants alike. Often an accountant will have a preferred software that they use which could be something bespoke they have developed themselves or something they love and trust off of the shelves.

Our accountants at Forma have tried and tested many different solutions with FreeAgent being the clear winner in the contractor accounting tool.

Do I need to register for VAT?

If your business has an annual income that exceeds or expects to exceed £85,000 then you must register for VAT.

If your annual turnover is lower than £85,000 then you do not have to register for VAT but it may be something you do voluntarily so you are all set up for the future.

Advantages of VAT registration

You never lose money being VAT registered - and will most likely be able to increase your overall profits by being able to charge the VAT on top on your usual rate and reclaim VAT on your expenses.

Professional image - it is generally seen that VAT registered companies are larger and more established.

Disadvantages of VAT registration

Added responsibilities - being VAT registered will bring the additional responsibility to file VAT returns with HMRC. This could be on a monthly, quarterly or annual basis depending on the VAT scheme. With this added responsibility does come additional paperwork whilst you must keep a tally of all things VAT related.

Competition - depending on your end clients, being VAT registered can also put you at a price competitive disadvantage. If you tend to work with individuals that are not VAT registered themselves, having to charge them VAT that they cannot reclaim could mean your prices are higher than your competitor.

When do I pay VAT?

Most businesses will report VAT on a quarterly basis with the payment being due within 1 month and 7 days after the end of the reporting quarter.

What expenses can I claim?

As a contractor, there are a vast number of different expenses that can be claimed for when working through a limited company.

These expenses must be deemed wholly, exclusively and necessary for business to carry out it's duties and some examples can include:

  • Travel
  • Food (subsistence)
  • Accommodation
  • Computer & office equipment
  • Postage & Stationery
  • Accountancy & professional fee's
  • Insurance
  • Telephone & internet

How do I pay myself?

A contractor working through their own limited company can pay themselves through a couple of ways such as paying a salary and paying dividends. There are a few factors that need to be considered when deciding the best way to go about this.

For example, when operating inside IR35, contractors will be restricted to paying themselves a salary however when operating outside IR35 the doors are opened to maximise tax efficiencies.

What is the optimal salary?

The optimum salary for a contractor to pay themselves in the current tax year is dependent on their overall income throughout the period.

In the instance there is no other income to be considered, it is generally recommended that salary is paid in line with the Secondary National Insurance threshold which is currently £732 per month (20/21).

What are dividends?

Dividends are the distribution of a company's profits to its shareholders.

What deadlines do I need to know?

As the director of your own limited company, it is your responsibility to ensure that all deadlines are met (and there can be quite a few to keep track of). Check out our guide on the important dates you'll need to keep tabs on here *link to important dates guide*

Self Assessment Tax Returns

Whilst working through your own limited company, as a director you are required to submit a yearly self assessment tax return to HMRC to report your personal income and taxes. To learn about the ins and outs of Self Assessment Tax returns, take a look at our guide here

Year End Accounts

Every limited company is required to submit annual year end Accounts to Companies House. Due within 9 months of the company year end, the accounts contain an overview of the company's financial activity for the year.

Confirmation Statements

Alongside keeping Companies House up to date with the company's financial activity, it is also the responsibility of the directors to keep the records up to date with the company's general information. Each year a confirmation statement is submitted to confirm these details such as address details, shareholder information, director details and more.

UTR Numbers

Individuals and company's are identified by HMRC by Unique Tax Reference Numbers (UTR). These unique references stay with the company and individual.

What is a P11D?

A P11D is a form submitted to HMRC to declare something known as benefits in kind. These benefits in kind are good or services that employees receive from the company outside of their salary. For example, a company car or private healthcare.

Free accounting consultations

If you're looking to have any queries surrounding any of the information covered in our guides & articles or perhaps something we haven't covered then please do not hesitate to book in your free consultation with one of our expert accountants!

Tax for Contractors


What are the dividend tax rates?

Unlike salary, dividends are not taxed at source and instead any tax due becomes payable yearly as part of a self assessment tax return. Because of this, it's important to consider the tax rates applied as follows:

  • The tax-free dividend allowance is £2,000
  • Basic-rate taxpayers pay 7.5%
  • Higher-rate taxpayers pay 32.5%
  • Additional-rate taxpayers pay 38.1%

What is UK corporation tax?

UK corporation tax is a tax payable by UK Limited Company's. It is calculated on the profits the company makes throughout its accounting period.

How much is UK corporation tax?

The current rate of corporation tax is 19% (20/21).

How do I reduce corporation tax?

As corporation tax is calculated based the company profits, the tax can be lowered by ensuring that you are claiming all allowable expenditure through the company whether this be by ensuring you are recording all your travel costs to considering making a pension contribution.

How does tax change as a contractor?

The biggest change when working as a contractor compared with say working as an employee is that you will become a lot more aware of the taxes you are paying. This because contractors have a lot more control over their finances and taxes with the added responsibility of making sure this is paid correctly and on time.

Insurance for contractors


Do contractors need insurance?

As a contractor working through your own limited company, it is recommended that you are covered by business insurances whether that be for your own peace of mind or in fact something that is mandatory in your contract.

What is contractor insurance?

There are several types of insurance that a contractor may benefit from. These policies are known as:

Professional Indemnity Insurance - in case a client sues for making a costly mistake whilst undertaking contractual duties such as the loss of data or unintentional breach of copyright.

Public Liability Insurance - in case a member of the public is injured, or property is damaged as a result of the actions of the company (or its employees).

Employers Liability Insurance - in case an employee is injured (or worse) whilst working for the company. Often mandatory for any company's that has more than one working employee.

Do I need professional indemnity insurance?

Covering legal costs and expenses in your defence as well as any damages or costs that may be awarded, professional indemnity insurance comes highly recommended for those providing professional services. Many professions need to have professional indemnity insurance as part of their respective industry body’s regulatory requirements and so always double check your contractual agreements.

Do I need public liability?

Covering compensation payments and legal costs if a member of the public sues your business because they’ve been injured or their property has been damaged, public indemnity insurance is highly recommended for all businesses. Many professions need to have p insurance as part of their respective industry body’s regulatory requirements and so always double check your contractual agreements.

Can I reclaim insurance costs?

Business insurance costs can be reclaimed through your business and are eligible for Corporation Tax relief.

Contractor insurance discounts

We have a partnership with Superscript (formerly Digital Risks) and can offer a 10% discount on any business insurance policy.

Contractor Bank Accounts


Do I need a business bank account?

When setting up a limited company, a business bank account is essential for keeping your business transactions separate from your personal transactions.

Personally paid expenses vs company paid expenses

Where possible, it is advisable to cover any company expenditure directly using company funds such as directly via the company bank account. This ensures that all company transactions are kept in one place and can be easily tracked.

Claiming personally paid expenses

There may be times when you have no option but to use your personal funds to cover company costs such as paying by cash or if you forget to bring your company card. It's important to keep a copy of the receipt of all expenses but this is especially important when paying for costs and expenses personally. This way, a record of the cost can be kept, logged in your company accounts and then your company can reimburse you for this.

Mortgages for Contractors


Can I get a mortgage as a contractor?

Definitely so! Following the flexible nature of contracting, you may have to provide a little more information about your finances and expected income but nothing that your accountant shouldn't be able to assist with.