Contractor Considerations: Common doubts about contracting

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Before taking the plunge, there are many doubts in the minds of new contractors. Some of the disadvantages of contracting can lead to confusion whether contracting is the right thing. Let's look at some common roadblocks before becoming a contractor and how to overcome these roadblocks.

Umbrella companies can be of great help to contractors who do not want the hassles associated with running a Limited Company. As part of our series 'Path of Education for New Contractors,' we have covered the basics of umbrella companies in an earlier article. In this article, we look at what are the legal obligations of an umbrella company towards contractors.

Marketing barriers

Are my skills in demand?

For aspiring contractors, a key question is on the demand for their skills in the market. For example, you are an expert in the Chinese language and culture, and you are highly in demand in your organization because your employer has a lot of clients from China. However, you would like to know whether there's enough demand for your Chinese language skills with other companies.

Do I have enough experience?

The contractors market is very competitive, and clients look for highly skilled and experienced contractors. If you have taken on a new role or you do not have enough practical experience, it can be a challenge as you may not have the confidence to take on projects alone. For example, you may be a newly graduated lawyer working in the legal department of an organization, but you may not have enough experience to handle projects independently.

How will I get new contracts?

You may not have any marketing experience, so it can be a little daunting to handle marketing independently. Also, taking up a contract may require writing multiple versions of CVs and going through several interviews, which could be different from interviews for full-time roles.

Are contractors hired only for project-based or boring roles?

New contractors often believe that for continuous work and non-project-type roles, companies will prefer full-time employees over contractors. Another doubt is that contractors are hired only for menial, boring, non-core roles. However, that is not true. As contracting offers so many advantages to companies, they hire contractors for all types of roles. For example, if you look at the contract jobs section of a recruitment portal named Total Jobs, you can see requirements for all types of non-project based or ongoing roles on a contract basis. Some examples of these roles include network engineers, payroll administrators, and architectural engineers, amongst others.


To overcome the above barriers, you can check with employment agencies and recruitment portals to gauge the demand in the market. You can explore recruitment sites like CW jobs, contract jobs on, Contractor UK, and Total jobs and online portals such as Elance and Rent a Coder. You can also consider taking up a part-time contractor role before leaving your current job.

Financial and accounting barriers

Do I have enough capital?

You may have doubts as to what kind of investment will be required to start a new contracting business. Depending on your skills, it may take months before you land your first contract. The doubts are even more if you have a large family and fixed expenses like mortgages, rent or car loans.

The first part is not that difficult, as you can start a contracting business within a few hours. Among the different methods, the most popular method of starting a contracting business is to set up a limited company. You can start a limited company on your own or use the services of a professional agency such as Tempo. As for capital, it is wise and good business sense to have an adequate financial cushion to manage your expenses for a few months.

Can I get mortgages like full-time employees?

Yes, contractors can secure mortgages similar to full-time employees. A few years ago contractors had to present up to three years of account statements. However, now, lenders have realized the growing potential of contracting and are relaxing their rules for lending to contractors.

Example: Halifax has relaxed the mortgage rules for both IT and non-IT contractors. Earlier contractors had to submit two years of financial statements for mortgages, but currently they merely have to provide evidence of an existing contract. The only precondition is that the contractors should have a minimum daily rate of £312.5. Contractors can borrow up to five times their annual estimated income based on their daily rate. A contractor with a daily rate of £350 or an annual income of 84,000 (five days per week for 48 weeks) can borrow up to £420,000 (5 x £84,000).

Will I will be liable for my mistakes?

Yes, contractors are liable for any mistakes that may cause losses to their clients. However, this can be countered by professional indemnity insurance. For example Hiscox provides professional indemnity insurance to IT contractors which covers any unintentional breach of contract, any losses, theft or damages to client documents or data, and any defamation claims.

I don't have business management experience

When you become a contractor, you will be expected to manage your business on your own. Apart from marketing you will also have to look at financial and accounting aspects such as invoicing, balance sheet, inventory, and assets. In addition, you will have to manage your own taxes.

This challenge can be met more easily if you find resources to assist you with these activities. Our site has a lot of useful tools and resources to help first-time contractors in overcoming these legal requirements. Another option is outsourcing your accounts and taxation activities to a professional accounting firm. You can use the services of Tempo, which is a specialist provider of accounting and financial services for independent contractors.


As you can see there are a lot of things to consider when becoming a contractor. The good part is that all of these 'roadblocks' can be overcome. As long you are confident about your skills and are ready to commit yourself, these issues cannot stop you from becoming a successful contractor.

Contractor Calculators

You may also find the following contractor calculators useful for your salary and tax calculations.

If you are looking for accounting support with your new limited company or if you need support setting up your accounts as a contractor, iCalculator recommends Tempo, a solid, dependable company that the team at iCalculator have known and worked with since 2009.

Self Assessment Guides for Contractors and Freelancers