Thinking of Contracting for the first time?

If you are thinking of moving from permanent employment to contracting or freelancing, then stop for a moment and consider your options.

In particular, you need to set up your new business in the best way possible whilst making it easier for your customers to deal with you.

We've summarised here for you the alternatives along with the pros and cons of each method; you can also read more about 'Moving from a Composite, Umbrella or Managed Service Company' here and for more details about 'how much can I earn as a contractor' visit our new page.

Another page we are sure you will find incredibly useful is: Take home pay Limited company or Umbrella company - The Real Story.

If you are thinking of contracting through your own company click here to read our new straightforward guide on how to contract through your own limited company or download our free step-by-step guide to contracting.

You may also find the following pages, guides and case studies useful:

You might also find our new How to become a contractor guide - illustrated infographic useful.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 0500 152500 / 01442 275789 or email

Your options . . . 

Following the April 2007 Budget announcements there are only two real options for contractors:

1. Operate through your own limited company. It is very important to stress that these must be genuine, one person Limited Companies and not a 'scheme' dreamed up by what are nothing more than marketing organisations.

2. Work through a PAYE umbrella company and pay full income tax and full national insurance contributions on your entire earnings. For details of SJD's umbrella company visit

A large percentage of "employment services" companies offering to set up Personal Service Companies or put you in a special 'scheme' are wide open to attack by the Revenue under the new guidelines, and it is unlikely that the major agencies would deal with them. Remember, if they don't have Accountancy in their name they probably aren't Accountants.

Special update: SJD become the first and currently only firm of accountants to have been reviewed and found to be fully compliant with all Managed Service Company (MSC) legislation by KPMG.

Contracting through your own Limited Company

It's often said that contracting through your own limited company is a daunting task. In fact, nothing could be further from the truth.

Administering your own limited company, with the support a dedicated firm of accountants like SJD Accountancy, is simple, efficient and inexpensive. 

Contracting through your own limited company does require a little more work than using an umbrella company, you'll need to form a company which will just take five minutes - you can form your company and check name availability by clicking the link, open a company bank account (we can help with this), send in a spreadsheet each month (just like using an umbrella company) and from time to time send cheques off to the Revenue, again we will help you to understand exactly how much to send.

You'll typically take home around 75% - 80% of your contract by working through your own limited company.

Benefits of Contracting through your own limited company:

  • The most tax efficient way of working, meaning you will take home more money (as much as £15,000 more on a £350 daily rate compared with using an umbrella company). 
  • Claim a wide range of expenses - accountancy fees, equipment, software etc.
  • Access to the Flat Rate VAT scheme.
  • Even if inside IR35 it may still be worth it, call us to find out by how much (0500 152 500).
  • You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator.
  • Running your own business isn't difficult; submit spreadsheets to your SJD accountant* - just like Umbrella time sheets and expenses.


  • There is a certain amount of paperwork involved, usually about 10 - 15 minutes per month.

Using an Umbrella company

An Umbrella service is where you are essentially an employee of the umbrella. The way it works is that your client or agent enters a contract with the umbrella for your services, and you enter into a contract with the umbrella. Click here for details of our award winning umbrella service.

You'll typically take home around 60% - 65% of your contract by working through an umbrella company.


  • Very easy to use, you simply enter your timesheet and expense details and wait to be paid.
  • All tax and NI is deducted before you receive your money, so you will have no further taxes to pay.
  • Ideal if your contract is less than three months.


  • You will receive a salary that is subject to full PAYE Tax and NI, it's just like being a permanent member of staff again.
  • You are reliant on the umbrella company to collect your money from the client or agent and then to pay it on to you.

Composite/Managed Service Company

Following the April 2007 Budget it is no longer possible to operate through a Composite/Managed Service Company. You must operate either through your own limited company or through a PAYE umbrella company.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 0500 152500 / 01442 275789 or email

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant* face to face.
  • Money back service guarantee. All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee of £120 plus VAT per month.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email:

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.