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New to Contracting

If you are new to contracting you need to consider whether you will use an umbrella company or set up your own limited company. Tech Talent is unable to work with sole traders because we are bound by strict tax legislation covered by HMRC's IR35.

Mobile Apps and Gaming is still a developing industry and unlike other better established areas of IT, many contractors start as sole traders but if you intend to work with agencies you need to make this important decision now.  Below is basic information about both options.

Umbrella Companies provide a registered company (an umbrella) from which to invoice. They will handle all your paperwork, collect payment from your agency and forward it on to your personal bank account. Umbrella companies usually charge you for their services but they manage your tax and their fees are often cancelled out by the tax savings they provide.

You will have the freedom to work where and when you wish but your umbrella company will pay your tax PAYE. This means your National Insurance contributions will be paid and you will be tax compliant. They should automatically cover you with professional indemnity insurance and can provide add-on services such as a private contributory pension, critical illness cover and accountancy services.

Agencies do not work directly with umbrella companies but they often earn referral fees for recommending contractors to them. This should not put you off, umbrella companies by and large are reliable and cost effective. You can leave them at the end of each contract placement if you wish and their loyalty lies with you not with any agency.

Umbrella companies by law have to pay you for your time so you can only charge hourly or day rates. Umbrella companies cannot provide set project rates.

A Limited Company is set up and owned by you. You will be a director of your company and responsible for signing your contract paperwork. Your agency will pay directly into your company bank account which you will need to open. It is illegal to pay companies via personal bank accounts.

You will be entirely responsible for your VAT and Corporation Tax returns and you may need an accountant. If you don't keep up with your National Insurance contributions you may not be able to claim a pension when you are older. You may need to register for VAT and if you don't you will not be able to charge VAT on your invoices. You will also need to get your own professional indemnity insurance.  However, your company will benefit from many tax savings that you cannot claim as an individual.

You can employ other individuals through your company and take on multiple projects. 

You will be responsible for raising your own invoices and chasing payment, although a good agency will pay you within the payment terms and without delay. You can set-up a limited company online very quickly and some larger umbrella companies provide separate accountancy services for first time limited company owners.


Owning your own company can be advantageous but it is a great responsibility and you may need the services of an accountant.

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Tel: 0118 402 1600
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