Permanent work has many benefits such as regular pay cheques and the benefits you get as an employee, however contracting can be a much more lucrative way to work for many people. Caroline Dubois tells us how she started off in the world of contracting and how she made the decision to work for herself and the advantages of using an umbrella company.

Considering the move to contracting

"Everyone I know left school expecting to find permanent work, and most of us probably never considered contracting or working for ourselves as it simply wasn't the done thing. When a few of my workmates left our company to become contractors, I started to hear more and more about how much they enjoyed it, which made me consider my options on that front. The high rates of pay, the flexibility and the potential to have time off in between contracts really appealed to me.

I was already thinking about the direction I wanted my career to go in, and my friends had told me how good contracting was for improving the breadth of their experience. I didn't want to stagnate in the same role for too long and I knew that additional experience as a contractor would make it easier to find a job if I did decide to return to permanent work in the future.

Confused between Umbrella or Limited

Limited or Umbrella?

Once I had made the decision, I realised that I needed to decide whether I wanted to work through an umbrella company or start my own limited company and work through that. Because it was going to be my first time working for myself, I decided to speak to some experts to avoid making rookie mistakes. I got in touch with an accountant and asked about working through a limited company – they explained it all so that I understood what was involved, which made it easier to compare the options when I started to investigate umbrella companies.

I spoke to an umbrella company who represented a lot of people in my industry and they answered all my questions about how I would be paid and what I would need to do in terms of admin. I decided to keep things simple and work through an umbrella company, at least to start with, so that I wasn’t taking on the responsibility of running a company as well as starting out as a contractor at the same time and I decided to review my options after six months.

I was pleasantly surprised at how easily the first six months went – I thought that beginning life as a contractor would mean lots of stress and worry, but the umbrella company took care of all the administration so that I could focus on finding work and establishing myself as a contractor. It was really helpful to have someone who could give me advice on how to complete my timesheets and make sure that I was claiming all the expenses I was entitled to without including anything that would land me in trouble.

One of my major fears about setting up a limited company was the fact that I am no expert when it comes to tax, especially after having it taken care of for me for so long. I didn't want to find myself on the wrong end of an investigation from HMRC in my first year as a contractor, but I also didn't want to lose out on potential tax benefits by missing out on claiming things that I could deduct. Having a dedicated account manager meant that I can ask all the questions I need to while I am still finding my feet, check when I fill out my expenses claims and I know that all the paperwork and finances will be double checked anyway, plus I don’t have to worry about tax returns or setting up National Insurance payments.

Read our guide to find out more on the differences between Limited or Umbrella.

Benefits of Contracting

Not having all these things on my plate has been brilliant in terms of my career as well and I have been landing some really great contracts. I was amazed at the kinds of rates I was commanding, and because I am earning so much more per hour, I can afford to take breaks in between contracts which has given me a chance to go on holiday and see more of my family. I've even been able to take up golf again, which I never used to be able to find the time for when I was limited to weekends and annual leave.

Because I am usually only on any given assignment for a few months at a time, I never get stuck in a rut and I have already had contracts which have allowed me to extend my experience and learn useful skills on the job. Because of that, I am already finding that I am qualified for some of the higher paying contracts in my field, which is really great and means that I have more choice over where I work, who I work for and how long I stay in one place.

I have found recently that I only have to work for around half the year to pay the bills and maintain our lifestyle, so I can take time off or take on more work depending on what our priorities are at the time. Having the element of choice is so liberating, and being able to earn enough to save and invest in my future is a great feeling.

I have also been really happy with working under an umbrella company. Even though it was originally a short-term measure while I broke into contracting, it has been so easy and I have found it so simple to just fill in a timesheet and know when I am going to be paid. I don’t have to worry about completing my tax return in time, think about putting money aside for tax or worry that I have declared my expenses incorrectly. With an umbrella company I can focus on work while I’m there, and forget about it when I’m done for the day, which is just how I like it." To find out more on making the move from permanent to contracting, please click here.

If you are considering a career as a contractor, then Nixon Williams can help you to decide how to organise your finances and which of the available options is best for you. We have a team of experienced accountants who are all well used to helping contractors, so you can benefit from our experience as well as our expertise. For more information on how we could help you, please give us a call on 01253 362062, or send us an email to newbusiness@nixonwilliams.com.