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The First Steps to Becoming an IT Contractor

There are a number of questions you should ask yourself when you first decide to become an IT contractor. Once you have the answers to these questions you will be well on the way towards becoming an IT contractor. Ask yourself the following:


IT contractors are key to many of the UK’s industries, and many individuals are looking to becoming a freelancer or set up their own company. With so many things to take into consideration, however, it can be a challenge to know where to even start.

As accountants for IT contractors, we have met many individuals who wish to take charge of their career and become their own bosses – in this article, we’re sharing our knowledge of how to become an IT contractor and enjoy the job you’ve always dreamed of.

Is IT Contracting for You?

Have you given contracting enough thought to be one hundred per cent sure this is truly what you want? While being able to work whenever or wherever you want and not having to answer to anyone is appealing, there are also some downsides to becoming your own boss. Being informed and doing your research will help you to minimise the risk of venturing out on your own.

It will also let you know whether you are ready to take on the responsibilities that come with owning a business, from admin duties to corporate tax if you set up a limited company.

Despite the risks, most contractors don’t ever regret taking the plunge. After all, you get the chance to increase your income and to control the type of work you take on, as well as to spend more time with your loved ones.

What’s Your Speciality?

IT contracting is a competitive market, so you should focus on your strengths and decide your niche. Where does your experience lie? Are you at the forefront of blockchain? Do you specialise in IT for small businesses? Are you highly skilled in Linux? Identify what makes you strong and what makes you stand out from your competitors – and, of course, continue to develop your skills in order to not stagnate.

Research the Market

The next step is figuring out whether there is a market for your skills and which rates you’ll be able to charge. Several factors will affect your rates, including your experience and the strength of the market (as well as the general economy), so it’s important that you are aware of it all before you quit your job.

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It’s also noteworthy to keep in mind that the market can change. For example, while the demand for IT contractors decreased during the recession, it rebounded once more. The current political climate may make some hesitate to pursue IT contracting, although experienced individuals will probably be used to dealing with the highs and lows of the market.

What is the Best Business Structure for You?

When you own your own business, you have the opportunity to choose the best type of operating structure for you. In essence, you should choose the one that offers you the most benefits; most contractors work through an umbrella company or own their own limited company, so you will want to be aware of the pros and cons of each and decide the one that will better suit your business and your goals.

If you opt to operate through an umbrella company, you become its employee, so you don’t have to worry about paperwork or deductions, as that will be taken care of for you. One of the main advantages of this is that it will save you time, although you will also have to pay a fee for these services.

By being the director of your company, you have the option of paying a part of your income in dividends, which is more tax-efficient, and you also have more control over every aspect of your business. However, there are more responsibilities to keep in mind and more paperwork to sort.

If you’re unsure what the best solution is, don’t hesitate to speak to contractor accountants who specialise in your industry. At Gorilla Accounting, we have many years of experience working with IT contractors, so we can advise on what is best for your business.

Registering with Companies House

If you choose the limited company path, there you will have to register your business with Companies House, the UK’s registrar of companies that is also an executive agency and trading fund. Your IT business will be listed publicly, so everyone will be able to see certain details, such as addresses, so make sure that you’re happy with this.

Before registering, you first need to set up a bank account for your company (learn more about business banking for contractors and freelancers), since you will not be paid in your own name, but through your business. You will also need to have a name for your company and appoint a director.

There are many legal responsibilities that come from being a director of a limited company, such as ensuring that all documents are sent to Companies House correctly and on time, including your annual returns, notices of any changes in address and your company accounts.

While you can choose to do all of this yourself, in order to make sure your tax information is filled out properly and there aren’t any mistakes during the registration process, getting help from a specialist accountant may be the best option.

As limited company accountants, you can rest assured that your business is in good hands. From incorporating your company to submitting your corporate tax returns, Gorilla Accounting will take on the hassle of managing your accounts, so you don’t have to.

Getting Paid as an IT Contractor

One of the most important things to consider when you’re thinking of becoming an IT contractor is payment. First of all, deciding how you get paid should be at the top of the list, since you can opt for hourly, daily or fixed project rates.

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Typically, more junior roles or contractors who are just starting out tend to charge hourly rates, where they’re paid for the hours they work and receive a fixed sum for each one. Hourly wages may also be the better choice when working really long projects, since contractors are not paid overtime.

IT contractors in senior positions usually charge daily rates, which is often for a set number of hours, although contractors may end up having to work more hours while unable to charge extra for them.

Knowing how much you should charge will not only depend on your experience but also on your speciality, so choosing a niche is key. According to Contractor UK, the average daily rate for an IT contractor who specialises on SQL is £450, while a Linux specialist could charge an average of £500 and a Java specialist £520.

There are also many emerging IT contracting skills that are increasing in demand, so a new contractor may want to consider them, from cloud native (with an average daily rate of £600) and artificial intelligence (charging a daily rate of £530), for instance.

How to Secure Your First Contract

There are several ways to get that all-important first job. You can choose to go through a recruitment agency or take a direct approach by using job boards, finding opportunities on LinkedIn or networking with other professionals.

Having a great CV is essential, so update yours by checking out our tips to write a killer contractor CV. When you find a contract job that you believe matches your experience and skills, send a targeted application by tailoring your CV to the project in question. Don’t forget to follow-up either, or chase relevant companies or agencies, since people are usually busy, and this can help them to keep your CV at the top of their list.

Once you secure the interview, be proactive and emphasise how your skills and expertise are beneficial to the project in question or the potential client’s business. By showcasing what you can do, you also have a higher chance of negotiating a better rate.

When Should You Quit Your Job?

When moving from permanent employment to contracting, many IT contractors struggle to know when to quit their job. While many wonder whether they should wait until they secure a gig, the truth is that individuals will likely have to give notice before they can search for contract work – many clients will want contractors to start working immediately and a lot of agencies or agents will not want to recommend you if you’re still employed.

There is no way to say, with absolute certainty, when you should quit your job, but it’s certainly worth considering that remaining employed may impact your chances of securing contracts.

You could, potentially, start your job search before you give your notice, to see whether there’s any interest in your skills if you start contracting. If potential agents or clients seem interested, then you may be able to quit your job with the peace of mind of knowing that your skills are in demand.

However, don’t ask around too much before making a decision, since people may remember you and you want to make a great first impression.

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Dealing with Tax

When you’re employed, your employer will take care of your tax issues, as your income will be processed via PAYE and your national insurance contributions will also be deducted without you having to worry about a thing.

If you choose to operate through an umbrella company, the company will handle your income and, therefore, your taxes and contributions, just like when you have a permanent job. You just need to submit your timesheets to the company, who will invoice the client on your behalf and handle your payslip, among other deductions.

However, if you’re the director of your limited company, you are responsible for your business’ tax affairs. You’re considered the employee of your limited company and may have to pay tax and national insurance contributions.

Hiring IT Contractor Accountants

Because this can be a complex matter and it’s important that you get it right, you may want to consider hiring specialist accountants who will help you handle your finances. Not only will this save you time, it can also give you peace of mind and save you money in the short and long run.

At Gorilla Accounting, we’re used to working with individuals from many different specialist sectors, including IT contracting, so we can assist in all of your accounting needs.

We offer your very own dedicated accountant who’s always available when you need them and can even guarantee you a same-day response when you contact us before 3pm – this means that you can quickly get an answer to some of your most pressing queries in no time at all.


Don’t hesitate to send us your enquiry if you wish to learn more about how we can help, and we’ll be in touch shortly. In the meantime, why not make use of our contract tax calculator to figure out your take-home pay?