I'm New to Contracting

No need to panic, Contracting is simple with the right advice!

Have you been offered a contract role, but are not sure where to start? Are you considering applying for contract jobs and looking for more information on what that means for you? Or have you just been left confused by the technical terms and jargon surrounding contract work? Our ‘New to Contracting’ guide aims to remove some of the confusion around contract work and breaks down your options in clear English.

What do I need?

Every contractor needs a way to be paid – you can’t just be paid cash-in-hand! A client will need to satisfy themselves that they are paying you legally, that you are insured and that proper taxes/NICs are paid on your earnings.

That is where Dolan Accountancy comes in. We aim to make the life of our contractors as simple as possible and remove all the hassle and stress often associated with starting up. For just £105 + VAT each month, we will provide you with everything you need to start contracting in just a few hours.

Our fixed fee package includes:

  • A dedicated and highly experienced, contractor accountant
  • Access to the highly acclaimed FreeAgent™ accountancy software platform – which is trusted by over 50,000 businesses
  • Use of our sister company Contractor Umbrella, margin free, for any of those contracts where umbrella employment is more suitable.
  • Our ‘money back’ service level guarantee

Our service covers all of your business and personal accountancy requirements, including:

  • Limited company formation, with advice on the best structure
  • Registered Office Address
  • Director’s Service Address
  • No-fee business banking
  • Registering you for an appropriate VAT scheme, including advice on which to choose
  • Year-end accounts for your limited company
  • Personal self-assessment tax return for one director
  • Quarterly VAT returns
  • Payroll bureau
  • Advice on:
    • Paying yourself, including dividends
    • Allowable expenses
    • Personal and company taxes due to HMRC
    • IR35 in relation to your contract
  • Handling communication with Companies House and HMRC on your behalf
  • Proactive alerts for all deadlines where your action is required

To find out more about the Dolan Accountancy service please visit our, our services page.




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Limited or Umbrella?

At Dolan Accountancy, we don’t believe you should be forced down either route, so for £105 + VAT per month, we will advise you on the most tax efficient way for you to operate, for each contract you sign up to. We have many contractors who work simultaneously through umbrella employment and their limited company.

So, what are the differences and which way of working do you think would suit you best?

There are two options. The first is to become a Director of your own Limited Company. As Director, you are responsible for the company’s paperwork, accounts and taxes. Your company is a separate legal entity to yourself – so the client pays the company and the company pays you.

The second option is to become employed by an Umbrella Company. As an employer, the Umbrella Company is responsible for all paperwork and taxes, as well as insuring you and providing you with employment rights. The Umbrella Company acts as an intermediary – so the client will pay the Umbrella Company, who takes a margin, pays all required taxes/NI and then pays you.

The two options are quite different and the best one depends on your own circumstances. So, which is the right choice for you?

In general, a Limited Company is the best option for anybody who:

  • Earns over £25,000 per year, or £100 per day
  • Expects to contract longer-term
  • Wants to maximise their take-home pay and doesn’t mind a bit of extra admin to achieve this
  • Wants to work for themselves, with complete control over their own finances

We would recommend an Umbrella Company for anybody who:

  • Earns less than £25,000 per year, or £100 per day
  • Is contracting short-term, or doesn’t know if they’ll continue contracting in future
  • Wants to be paid with the minimum of hassle and paperwork

However, everybody’s circumstances are different. There may be a reason to set up a Limited Company on a lower yearly income, or reasons to prefer an umbrella company even for higher-rate contracting. Our experts would be happy to discuss the right choice for you – if you would like more information, please call us on 01442 795 100 or email: sophie.lewis@dolanaccountancy.com.


Working through your own Limited company is generally the most tax-efficient way to be paid, but comes with extra responsibilities and administration. It’s possible to run a Limited company yourself, but the vast majority of contractors choose to work with a specialist contractor accountant – it’s not recommended to run your company solo unless you are an experienced accountant yourself!

A contractor accountant will take care of:

  • Company formation, including a registered address
  • Your accounts, personal tax return, corporation tax return and VAT return
  • Tax planning – when and how you should be paid, to maximise your take-home pay
  • Advising you of legislation changes that affect you and your business

You have complete control of your own financial affairs and there are no intermediaries between the client or agency and your pay. Your take-home pay will be highest through a Limited Company – you can claim business expenses relating to your work, to reduce your tax bill, access the flat rate VAT scheme and plan when to take salary and dividends in order to minimise the amount of tax you are liable to pay. If that sounds confusing, don’t worry – that’s what Dolan Accountancy is here for!
Typically you can expect to take home 75-80% of your income through a Limited Company.

You might ask why set up a Limited Company, instead of registering as a sole trader. The reason is that a Limited Company is a separate entity to yourself. If you were sued for any reason as a sole trader, or a client didn’t pay you, you would be personally liable for any debts and costs – potentially risking everything you own! You will also find most end clients and agencies will not use the services of a sole-trader contractor, due to the risks effecting them too.


Becoming an employee of an Umbrella Company is a hassle-free way to work and minimises your own duties and responsibilities. Usually, the only thing you need to do through an Umbrella Company is submit weekly or monthly timesheets – they will then take care of everything else for you.

An Umbrella Company will handle:

  • Your PAYE tax and National Insurance contributions
  • Your insurance while you are working for clients
  • Invoicing, contracts and all other administration with your client
  • Your statutory employment rights, such as sick pay and workplace pension

As an employee of the Umbrella Company, the Umbrella acts as an intermediary between you and the client. Your role becomes that of an employee – so the Umbrella charges the client for your work, makes their profit margin, pays all applicable tax/NICs to HMRC and then pays you. Due to the lack of tax planning and tax advantages compared to a Limited Company, you can expect to take home around 60-65% of your agreed rate.

My Pay is £ per

Umbrella take home pay

per week

per month

View the full calculation
Limited take home pay

per week

per month

find out more about limited

Limited calculation based on outside IR35


Calculate your take home pay

Find out more about contracting…

We are sure you have many questions, so give us a call on 01442 795 100, however, if you’d like to read any further guides we would suggest starting with:

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