Life as a contractor or consultant is itself personal development due to the nature of the job. Just think of the learning curve that you need to address; moving from being an employee who is essentially directed by an employer to being the director of a company.
For some, the transition can be as simple as appointing a great accountant to handle the company incorporation and the financial side, and perhaps reading a few self-help books. For most, it is prudent to see personal development as a continuous journey. This is one of the most rewarding areas of running your own business as you are the one to decide how you develop yourself.
No more standardised career paths or fighting over the training budget. Training courses that relate to your business and its growth are not only great for your development, they are a legitimate business expense and reduce your tax liabilities. You reduce your tax bill while you expand your skills and knowledge.
Another benefit of training and developing yourself is that you are showing active investment in your company; this is a robust way of showing you are a trading company and is supporting evidence should your IR35 status come into question.
What is IR35?
IR35 was HMRC’s (then the Inland Revenue) response to the growing number of employees leaving their permanent roles, setting up their own businesses and then returning to perform their old role as a contractor to avoid paying tax and national insurance at the higher rates.
IR35 – the intermediaries legislation is a group of legislation within the Social Security Contributions (Intermediaries) Regulations 2000 and the Finance Act in 2000 (Schedule 12). It aims to ensure that contractors working essentially as ‘disguised employees’ and the employer pay the same level of tax through PAYE and national insurance as if the contractor were an employee.
Put simply, your IR35 status (which can vary from contract to contract) determines your tax position with HMRC. It’s important to understand the definition and your personal risk of being defined as a ‘disguised employee’ of your client for each contract you undertake. It’s worth noting that the majority of freelancers and contractors fall outside IR35, and that HMRC want to target their resources effectively to reduce tax dodging (both intentional and unintentional).
Core personal development opportunities
Most permanent employees are restricted to personal development through paid-for courses and on the job training. For the contractor, there is a much wider and richer bank of personal development available as you ultimately control the spending. When you start life as a contractor or consultant there are a few key areas you should look at to continue your development in conjunction with the better-known training routes.
- Membership of professional bodies. HMRC recognises a wide range of professional bodies as a tax-deductible business expense. Membership to specialist bodies within your field broadens your networking opportunities as well as providing knowledge-sharing resources and reduced rates on many courses.
- Subscriptions and books. Reading is one of the easiest and most efficient ways of keeping up to date with industry developments. You can maximise any down-time you may have between meetings or when you are travelling by keeping a stash of the recent magazines and bulletins at the ready. Again, the cost of these is a legitimate business expense.
- Government-run courses. This is a cost-effective way of keeping on top of legislative changes around running your own business. HMRC, DTI and other governing bodies offer free courses to business owners to enable them to run their business effectively and remain compliant with the relevant guidelines.
- Trade-specific and personal development courses. When starting out as a contractor or consultant, you’ll no doubt be up to speed technically within your area of expertise, but require development in certain business skills. It is important to ensure that you retain your level of aptitude in all areas if you are to remain competitive.
- Networking with peers and mentors. A lesser-known area of personal development is through your network of contacts. Many consultants and contractors benefit from the close relationship with a mentor and other successful peers. Mentors tend to be more senior or experienced and they needn’t necessarily be in the same line of work as you for you to benefit from their knowledge. Peers offer a great way to bounce ideas and learn directly from each other, which is a more mutually beneficial relationship.
- Your choice of contracts. Ensure that each new opportunity you take fits with your personal development goals. Does it offer the opportunity to work with new technologies, a different cultural dynamic, a growing business area or other new experience? This is often the key to keeping your skills and knowledge fresh.
Plan, review and change – the lifeblood of contractors and consultants
As a contractor or consultant, standing still is the enemy. You need to move forward with contracts and your understanding or risk being left behind. When you start out as a contractor or consultant, it is important to understand your weaknesses and areas for personal development. This forms the first draft of your personal development plan.
As a permanent employee your personal development is managed by your employer, but is often aligned to their goals rather than your own. As your own boss, you have the opportunity to steer your career in the direction that fits with your life plan. By having a clear understanding of where you want to go, you can ensure that you build the skills and knowledge to get you there.
Your personal development plan – a living document
Your personal development plan is a map of where you want to take your knowledge and understanding.
- Start by noting down weaker areas and where you need to develop your skills and knowledge.
- Identify opportunities to develop these areas; remember to utilise all the avenues discussed above as training isn’t always the answer.
- Map out how and when you are going to develop yourself. Remember to plan around any peaks and troughs in working patterns and ensure that you find the time to build development into your work life for the long term.
- Review the plan regularly and amend it accordingly. It’s important to ensure that it continues to meet your personal development needs. It also means that you can take advantage of new and upcoming courses that may not have been available when you wrote your plan. Don’t think of it as a yearly activity; by reviewing quarterly, you are more likely to make minor tweaks and keep things fresh for longer.
- Plan your investment and ensure you look at development plans forming part of your business expenses.
When developing yourself, retain focus on the bigger picture; your career goals and your wider life plans are important. We also look at career development and ultimate goals in this guide to give you inspiration.
Useful personal development links
Here’s a list of interesting development links that you can use in conjunction with industry-specific suppliers in your field.
- HMRC approved professional bodies – lists all the professional bodies and societies that HMRC recognises for tax relief.
- TED – inspirational talks and thought leadership.
- The English Manner – experts in etiquette, protocol and social skills. Courses on essential business skills and market-specific courses such as Chinese etiquette.
- IPSE – a not-for-profit trade association that represents the interests of the UK independent professionals and the self employed. It actively develops tools, services and relationships to advice and support you in your own business journey.
- Entrepreneur and Minutehack – thought provoking resources for entrepreneurs to inspire and help fine-tune your business ideas.
- Start With Why – an inspirational book by Simon Sinek, for those who want to learn the art of ispiring others or need to find someone with a powerful effective leadership approach to be their own source of inspiration.