Setting up as a contractor / sole trader post redundancy

roly66

Hi All

Bit of a niche one here but hoping someone may have some useful info/advice for me please!

Situation:

1. my permanent role (at 40% tax rate) got made redundant & I've found a contractor role outside of IR35 so I need to set up as a sole trader or limited company to be able to bill the client
2. I'm currently unsure how long I'll be contracting for as I'm hoping to get a new permanent role but who knows how long that will take.
3. I might actually want to do contract work on a permanent basis but am unsure yet as I've only currently got one contractor role lined up.

Questions:

1. If the billable profit I make on the contractor role is less than £50k should I be setting myself up as a Sole Trader?
2. If I do set up as a Sole Trader how should I complete my self-assessment as I'll have been working for some of the year on my old permanent role & may be working again in the same tax year if I get a new permanent role? 
3. Does HMRC only look at the profit from the contractor role & therefore should I only complete my self-assessment based on that amount? 
4. Or will HMRC look at my earnings from the permanent role(s) too in which case how would I complete the self-assessment?
5. If it looks like I may be doing contract work on a permanent basis so should I be setting up a Limited company from the start or can I switch from Sole Trader to Limited company as the need arises?

Hope that all makes sense & any advice/guidance much appreciated!

Thanks

pramsay13

Not particularly niche or complicated unless I'm misunderstanding. 
Simply register as self employed and complete self assessment when required, usually by end of January following the April end of tax year, so if you are talking about starting now that would be 25-26 tax year ending April 2026, so self assessment would be due January 2027. 
Your self assessment will already have details of tax paid as an employee so you just check it's correct and then complete the self assessment section. 
You can choose to set up a limited company or as a sole trader. There are pros and cons of both. Might be worth getting an accountant to start with to talk through the options. 

DullGreyGuy

Will your client accept you as a sole trader? In my industry they won't so its umbrella or LTD

1. Up to you... as a sole trader any profits you make are instantly taken into account for this years taxes. As a LTD you could keep the profits in the company if you dont need the money straight away and take it out later/over time

2. By completing the relevant sections, you put your sole trader activity in the sole trader section and the employee in the employee one 

3 & 4 - HMRC adds up on all your earnings, works out the taxes due, minuses off the taxes already paid and sends you a bill. The second part of 4 is a repeat of 2

5. You can switch to a LTD at a later time if you want.