What exactly is a ‘contractor’?
You may well know this already, but we thought it might help to just give a quick overview of what we mean by a contractor in the context of this guide, as opposed to a freelancer or other temporary worker.
A contractor ‘contracts out’ their time to a client in return for payment, and usually only has one client at a time, unlike a freelancer who may work with many clients simultaneously. Contractors also usually work on client site, though some may have home working arrangements with their clients if that suits both parties.
As a contractor you will charge an agreed hourly or daily rate for your services, and will then invoice your client for your time each month, either directly or through an intermediary. This is why most contractors choose to set up and operate through a limited company, as it makes managing their finances far easier. In fact, many clients insist on this as part of a contract agreement.