Your first contract: the complete checklist
Last updated:
The jump from permanent to contracting is 20% skills and 80% admin discipline. This is the order that avoids the classic first-timer traps.
Before you resign
- Run the numbers at net: £X/day sounds great until employer NI, margin and income tax bite — calculate take-home for umbrella and LTD.
- Verify the status evidence: "outside IR35" must appear in the written terms — see what real evidence looks like.
- Line up 2 references — agencies check fast.
Offer to start date
- LTD route: incorporate (or use a ready company), business bank, VAT registration (optional below £90k turnover — decide with the accountant).
- Umbrella route: pick from the checklist, sign the employment contract before timesheet one.
- Insurances live from day one (guide).
- Contract terms: rate, payment terms (14–30 days), notice (1 week either side is standard), extension mechanism, and who owns IP.
Timesheet one
Log hours, invoice same-day where allowed, and set aside tax as you go if via LTD (the dividend discipline: never spend gross). Inside-IR35 deployments pay you net anyway — compare which route the offer actually took with the umbrella vs LTD explainer.
The rate-to-net reality check, in order
Quoted £550/day? Walk it through: employer NI and (if umbrella) margin come off the top, then income tax 20/40/45%, employee NI 8%/2% — the calculator does this in one input. First-timers comparing a £550 outside offer against a £600 inside offer usually find the outside offer wins by more than the £50 spread suggests. Net-to-net is the only honest comparison.
Notice periods and garden leave
Perm notice (typically 1–3 months) overlaps your contracting start; contractors usually carry a 1-week notice. Check your perm contract for garden leave and client-exclusivity clauses before you sign anything with the agency — the enforcement risk sits with you if you jump early.
Timesheet discipline = cashflow
Agencies pay on approved timesheets, not worked hours: know the approval chain, submit Monday-morning, keep your own ledger, and chase at day 14 of a 14-day term without apology. First-contract payment terms of 30 days are negotiable to 14 more often than people think.
Setting up the LTD: the order that avoids refiling
Incorporate → business bank (needs incorporation cert) → PAYE scheme before the first salary run → VAT registration decision (voluntary below £90k: fine if B2B agency work, skip if you can't reclaim) → accountant engaged before the first invoice, not the first tax return. Doing PAYE after the salary exists is the classic £100-penalty first mistake; the accountant guide prevents the rest.
The references that survive agencies
Two named referees with mobiles, briefed in advance, from the last two engagements (perm references count for first-timers). Agencies verify before submitting you; unbriefed referees who "never answer" cost you the slot. Then keep the same referees for two years — after that, client names on the CV do the work.
Get new outside-IR35 roles by email
Free vs Pro alerts — instant Telegram on Pro.
Hub: back to the hub · all guides