To help our new and existing contractors to choose whether to go limited or umbrella, we interviewed some life sciences professionals who have set up their own limited company to find out why they opted to do so, and to give their advice to others who might find themselves in similar circumstances.
Before a recruitment agency can place you into a contract role, you will usually be required to either work for an umbrella company or set up your own limited company so that you can be paid and meet your tax liabilities. So, if you’re thinking of becoming self-employed and working as a contractor for the first time, or even reconsidering your current circumstances, you will probably need all the help that you can get to decide which option is best for you.
It’s one thing for us to give you all the pros and cons of umbrella companies and limited companies, but who better to assist you with making a decision than the very people who have been there and done it?
 | Peter Regulatory Affairs Consultant |
When did you decide to start contracting and why?
I started in 2009. I wasn’t happy in my current position, so I decided to resign and see what else would come up. I started contracting because those were the positions that were available and I haven’t looked back since.
What are the best things about contracting and what do you feel are the main drawbacks?
The best part is the flexibility. It can depend on the contract, some are more rigid than others, but I’ve been very lucky in my roles to have flexible working hours so I don’t always work a standard work day of 9-5. I don’t need to answer to anybody or have an appraisal or career development plan like you would within a big pharma company, which for me is a big bonus.
One of the main drawbacks is that contracting is perceived to lack job security – although even a permanent job can end at any time. I think it could be quite career limiting if you wanted to move back into a big pharma company again though, because the longer you spend contracting, the more you can lose touch with being involved with big companies. You can also feel on the outside a little or feel treated differently sometimes, rather than being part of a team. Some people say that you don’t have any benefits, although if your rate is sufficient it normally covers things like that.
>What is the main reason that you chose to set up a limited company rather than using an umbrella company? What or who influenced your decision?
Setting up a company is something that I wanted to do. It allows me to grow in a different way to an umbrella company because it gives me exposure, in terms of my own company name. It also allows me the opportunity to work independently for other vendors on an ad-hoc basis, as well as through an agency, and if I want to work for multiple clients in the future I have a platform to launch further projects.
Do you feel that you made the right decision, and would anything make you switch to an umbrella company now?
I think that I made the right decision; I can’t see any reason why I would switch.
What are the best things about having a limited company and what are the main problems with it?
The best part of having a limited company is the flexibility that it gives you. If you work for an umbrella company and you want to work for other vendors then you would have to go through the processes of setting up another contract.
There aren’t many problems. It’s pretty simple, I think, once you understand your obligations, in terms of Companies House and Revenue and Customs. Obviously having a good accountant helps; you can do a lot of it yourself but you do need an accountant to sign-off on your books. I’ve just had to do my first year end and it has gone smoothly without much hassle. You will need to do a self-assessment, whereas an umbrella would pay through PAYE, but that doesn’t make much of a difference.
What advice would you give to someone who is deciding which to choose?
My question to them would be how long do you see yourself working as a contractor? If it is a short-term stop-gap while looking for other work and they are planning on going back to permanent work, then in the interim they should look to operate through an umbrella company as it’s much less hassle than setting up a limited company that would involve having to do an annual return and registering for a self-assessment. If they are considering contracting for more than a year, or as a long-term prospect, then look to set up a limited company. It can depend on the contract as well, as really you need to fall outside IR35 to make big savings.
 | Rebecca Clinical Research Assistant |
When did you decide to start contracting and why?
I started contracting in 2011, because I was made redundant from a permanent position.
What are the best things about contracting and what do you feel are the main drawbacks?
The best things about contracting for me is the flexibility. The position I have allows me to organise my own schedule and work from home. I also find that contracting reduces the amount of additional company-specific tasks and meetings required so I get to do my day job most of the time, which is what I want.
I would say the obvious drawback is that you don’t know how long a contract will last or what your next one will be.
What is the main reason that you chose to set up a limited company rather than using an umbrella company? What or who influenced your decision?
I originally started with an umbrella company but soon felt that they were receiving a lot of money for doing very little. I had decided to use the umbrella company out of ease when I was offered the job because I knew nothing about setting up a limited company. However, when I realised what was involved, and that most people preferred the limited company route, I decided to do this.
Do you feel that you made the right decision, and would anything make you switch to an umbrella company now?
Yes I definitely feel that I made the right decision and I would definitely not go back to an umbrella company.
What are the best things about having a limited company and what are the main problems with it?
The best thing about having a limited company is that you are in control of everything; you can make sure things are done on time and correctly.
The main problems are the additional pieces of work — eg. paying tax, PAYE, etc. It is the set-up of these things that takes time, and I have to make sure that I set reminders to do things when they are due. The other obvious thing is keeping track of your money and having the money to pay these things when they become due.
What advice would you give to someone who is deciding which to choose?
If someone needs to make a quick decision and has no knowledge of a limited company, I can see the appeal for using an umbrella company like I initially did. However, if the person has time to set up their own limited company and is prepared to keep track of things, then this is the best option.
In our next blog, we interview contractors who opted to use an umbrella company.
Did you find our contractors advice helpful? Why not share your stories and advice on becoming a contractor in the comments below.
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