Going contract after years on staff: the first six months

It's your last Friday on staff. The shift has had a whip-round, and someone's bought a cake with a spanner on it. Your badge goes back to the gatehouse on the way out. On Monday you're a contractor.

You know the work. You've done the 3am calls, the summer shutdowns and the drive faults nobody else would touch. None of that changes on Monday.

Everything around the work does. No payslip on the 28th. No paid holiday. No sick pay. No pension top-up. Nobody sorting your tax.

Engineers who struggle in their first six months rarely struggle on the tools. They run short of cash, or they get caught by a tax bill they didn't see coming.

Before you hand your notice in

Read your contract first. Check the notice period, and check for anything about working for a competitor. GOV.UK flags that there are rules on "what will happen if you leave to work for a competitor" (GOV.UK). If you plan to go back to the same site through an agency, read that clause twice.

Then write down what your staff job pays for that never shows on the payslip. Your employer pays a minimum of 3%* into your workplace pension (GOV.UK). Almost every worker gets 5.6 weeks'* paid holiday a year (GOV.UK). Statutory Sick Pay is there for employees (GOV.UK). Then there's the van, the tools, the training and the tickets they paid to renew.

How you get paid decides how much of that you keep. Agency workers still get the 5.6 weeks*. Go self-employed and it stops. Self-employed people don't get holiday or sick pay (GOV.UK). If you haven't picked a route yet, start with umbrella, limited or PAYE.

Build the buffer before you go

On staff, money arrives every month whatever happens. Contracting doesn't work like that.

Through an agency on PAYE, you're usually paid weekly in arrears. Invoice a business yourself and the wait gets longer. If you agree a payment date with a business, it must usually be within 60 days*. With no date agreed, the payment is late 30 days* after the customer gets your invoice (GOV.UK). So on 60-day terms, the work you do in month one gets paid in month three.

Here's our view. Don't leave without at least three months of bills in the bank. Not three months of wages. Three months of mortgage, car, food and everything else that comes out on a fixed date. Gaps between jobs happen to good engineers, and the first gap always feels longest.

The first tax bill is the one that hurts

You can start trading straight away. But if you're a sole trader earning more than £1,000* in a tax year, you must register for Self Assessment (GOV.UK). You must tell HMRC by 5 October* after the tax year ends (GOV.UK). You can register earlier, and we would.

Then comes the bit nobody warns you about: payments on account. These are payments towards next year's bill, each one half of the tax you owed last year. They're due on 31 January and 31 July* (GOV.UK).

In your first year you pay both at once. GOV.UK's own example is a £3,000 bill. With no payments on account the year before, the total to pay by 31 January comes to £4,500*. That's the bill plus half of it again, on one date, usually in a quiet month.

So open a second bank account on day one. Every time a payment lands, move a slice of it across before you spend anything. Your accountant can tell you how big the slice should be. Self Assessment for contract engineers goes through the return itself.

Months one to three: get known

The first jobs are about being asked back. Turn up early. Do the site induction properly. Leave a fault report the next shift can actually use, even if nobody asked for one.

Sites will check your paperwork before you start. Have your tickets, your right to work documents and your insurance ready to send the same day. Which tickets get you contract work covers the ones that open doors, and insurance for contract engineers covers the certificates sites ask for.

Keep a simple log as you go. Site, date, machine, fault, fix, and who signed your timesheet. It feeds your invoices and your tax return. It also gives you names to ring when work goes quiet.

Months four to six: check the numbers

By now you have real figures. Count the days you actually billed, against the days you hoped to bill. Add up what came in, what went out on kit and travel, and what's sitting in the tax account.

If the numbers don't work, the rate is usually the problem. Most engineers price their first jobs off their old hourly wage and forget the holiday, pension and dead days they now pay for themselves. Working out your day rate shows how to price those back in.

Look at how each job runs, too. Your tax status goes with the job, so two sites can give two different answers. HMRC's CEST tool checks status for a specific engagement. HMRC will stand by its results as long as what you put in stays accurate (GOV.UK). Run it on each new contract and keep a copy.

What to do on Monday

1. Read your employment contract for the notice period and any clause about working for a competitor.
2. List everything your employer pays for you now, from pension to tickets, and put a yearly cost next to each.
3. Open a separate bank account for tax before you send your first invoice.
4. Register for Self Assessment as soon as you start trading. Don't wait for the October deadline.

* Pension, holiday, payment terms, the £1,000 registration point and the Self Assessment dates and example correct as of 27 August 2026. Check GOV.UK's guide to working for yourself and Self Assessment deadlines for the latest.