Contracting Clarified with Our Team

To help you navigate the ins and outs of contracting, Agnija, one of our key team members here at Icon Accounting, has put together some practical advice and answers to common questions from contractors. Whether you’re just starting out or have been contracting for years, these tips will help you maximise your benefits and establish solid financial habits.

1. Are there specific types of expenses that contractors commonly process, and what best practices do you recommend for managing them?

Common contractor expenses include portion of internet, portion of phone bills, or the e-worker’s allowance. To simplify the process and avoid delays, I always advise contractors to upload expenses regularly—ideally every month—instead of waiting to upload them all in bulk. Bulk submissions often take much longer to review, and mistakes such as incorrect bills being uploaded can cause significant delays in processing.

2. Are there any expenses that contractors often overlook, but can be significant for tax relief?

Yes, contractors can often miss out on some expenses. For example, stationery is one, or the vouchers that can be claimed through the Small Benefit Exemption Scheme. Additionally, there’s a common misconception that the e-worker’s allowance covers phone and internet bills, but a portion of your phone bill can actually be expensed separately to the e-workers allowance, for a greater tax benefit.

3. What is the most common mistake contractors make regarding their finances?

One of the most common mistakes is not setting up a pension. Pensions offer significant tax relief and long-term financial security, yet they can be often overlooked by contractors.

4. For new contractors, what steps or routines do you suggest establishing and maintain good financial habits?

For those just starting their contracting journey, I recommend first establishing and understanding your income and requirements before setting up a pension. I’ve seen cases where pensions are set up before a contract begins, with contributions set too high for the actual income, which can create unnecessary stress. Planning your expenses is equally important. If you’re ever in doubt, speak to your account manager—they can guide you on what’s permissible under your current contract.

5. What advice would you give to someone just starting their contracting journey?

Ask as many questions as possible. There are no silly questions, especially when you’re new to contracting. Understanding the perks of expenses etc., early on can make a big difference to your financial well-being and help you take full advantage of tax relief opportunities.

6. How frequently should contractors review their setup to ensure it aligns with their career goals and facilitates growth?

For contractors operating under umbrella companies, I suggest an annual review with your account manager. These conversations can help identify opportunities for growth, such as transitioning to a personal limited company (PLC) setup, which may better suit your long-term career goals.

7. As a dedicated account manager at Icon Accounting, if there’s one resource you consistently recommend to your clients in the contractor community, what would it be?

I strongly recommend that every contractor obtain an income protection policy. This can be discussed during your free consultation with Rockwell, which is included with your setup through Icon Accounting. An income protection policy not only provides a safety net in case of emergencies but also increases your tax credits and reduces your overall tax liability. It’s a win-win for both peace of mind and financial planning.