How to become a successful IT Contractor

If you have an entrepreneurial spirit, specialist technical skills and the desire to start your own business, then IT contracting may be the perfect career for you. It isn’t for everyone, of course, so we’ve listed below some of the qualities that make a successful IT contractor.

Is there a market for your skills?

Clients typically use contractors to fill short-term skill gaps, so you will be expected to hit the ground running – with a specific set of technical skills to match the requirements.

Before taking the leap into contracting, take some time to make sure that there is a demand for your specific skill set. Browse contract job listings in your sector, and talk to specialist recruitment agencies to get an idea of market conditions.

What’s it like to be an independent contractor?

Are you suited to the contracting lifestyle? This is an essential question to ask yourself. There are highs and lows working as a professional contractor. You may find the ideal contract – near to home, with a great daily rate, using your favourite skills.

However, you can’t always pick and choose – particularly if the contract market is flat. You must be able to take on sub-par contracts at times, and be prepared to compromise on location, rates and the business sectors you are prepared to work in.

More earning potential, but no ‘perks’

You can earn significantly more as a contractor than a salaried IT worker, however once you go it alone, you will need to factor in the costs of some perks permanent employees take for granted. You are only paid for the time you are working for your client – not for any time off for holidays or sickness.

You will need to make your own pension arrangements, insure yourself in case you accidentally make mistakes at work (professional indemnity cover), and pay for any accountancy help you need (as a limited company owner), or umbrella fees (if you work via an umbrella company).

Don’t spend your tax money

If you’re working via a limited company, you (as a director) must always put aside any company funds required to pay any Corporation Tax and VAT liabilities you build up – ideally in a separate business bank account. You can distribute the ‘retained profit’ of your company to your shareholders (after all tax liabilities and other company expenses have been accounted for).

Any income you draw down on top of your salary is taxed via the self-assessment process. You will need to pay any personal tax you owe by the end of January following the tax year in question. Again, you would be wise to set some money aside to meet these costs – otherwise you may have a nasty surprise at tax return time.

Quick Tip: Tide allows account holders with limited businesses to open up to three additional accounts, so you can easily set aside tax obligations. If you haven’t done so yet, you can register your business here.

Have you heard of IR35?

The Intermediaries Legislation (IR35) has been in place for 20 years. These tax rules were put in place to deter ‘disguised employment’ – specifically the practice of working via an intermediary (a limited company) to provide your skills to end clients – but continuing to work in the same way as a normal ’employee’, rather than in the manner of a truly self-employed person.

If there’s one single thing you research before you start contracting, it is IR35 – as your income will be taxed heavily if your contracts are caught by the rules. Read more about this in our Simple Guide to IR35.

Find a great accountant

If you’re working via your own limited company (as many contractors do), you should hire a specialist accountant as soon as you can. For a fixed monthly fee, a contractor accountant will take care of all of the company administration on your behalf so you can get on with what you do best – contracting!


As you gain experience as a contractor, you’ll soon find out that a large number of jobs come via people you know rather than contract job boards. LinkedIn is an indispensable networking tool, as you can keep in touch with your network with minimal effort. Make sure you spend some time each week updating your profile – and upload a professional photo!

Enjoy yourself

Contracting can be a great career choice – you can earn good money, and gain much more control over when and where you work. You can experience a far wider range of industries and projects than you might as a permanent employee, and even take contracts overseas if this appeals. Most people who make the move into the contracting world never look back.

You can find out more at IT Contracting.

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Photo by Austin Distel, published on Unsplash

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James Leckie


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