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The complications of contractor accounts

Working as a contractor is a great way to build up a good CV and to gain experience. It gives you the chance to work on a range of projects, and you are usually able to work when you want and where you want.

However, as a contractor you are responsible for your own finances. That means that you have to take care of your own tax, accounts, and national insurance contributions, which can be a real headache.

Additional rules – IR35

Contractor accounts are more complicated than they are for self-employed people, who work for a wide range of clients. It is easier for them to prove that they are genuinely self-employed because so many different people and firms pay them.

A contractor will work for one firm for long periods, typically staying until a project is finished. This can make it look like they are actually employed by a firm rather than working as a genuine contractor. To stop firms switching full employees to contractor status to save tax, the government introduced special tax rules for contractors known as IR35. They are being reviewed, but in the meantime, IR35 still complicates the tax affairs of contractors.


Understanding the expenses you can and cannot claim is difficult. It takes time to work out what you can claim for and what you cannot. However, it is important to understand, because it makes a huge difference to how much tax you pay.

Company structure

Contractors can register as self-employed, as a limited company, or work under an umbrella company. Understanding which is best from a tax point of view is important, as it affects how much money you hand over.

The fact that contractor accounts are complicated is why so many contractors choose to hire an accountant. However, if you choose to do this, it is important to find an accountancy firm that genuinely has experience of managing contractor accounts.

Posted by Mark
November 8, 2014

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