Oil & Gas Contractors
The advantages of being an engineer entering the contracting arena are varied and profound. Working on contract jobs gives you an opportunity not only to make a lucrative living but also to explore the world. Your skills can take you on varied assignments that can place you anywhere from Scotland to Dubai.
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Should I join an umbrella company or start a limited company?
When you start your contracting career one of the biggest decisions you have to make is how you’re going to manage your income. There are two main ways to do this: join forces with an umbrella company or go it alone with a limited company. Your decision will depend on your specific needs, so here’s a brief rundown of the advantages of each option.
Why should I join an umbrella company?
An umbrella company offers the following benefits:
- Takes all the administration off your hands
An umbrella company functions as your employer, so they’re the ones who invoice and chase your clients. Then, they deduct the appropriate tax, national insurance, and an administration fee, and pay you a weekly wage.
- You know that money will come in at steady rate
The market can be volatile and an umbrella company can provide a certain level of stability and you don’t have to worry about chasing up clients for payment. No matter what happens, you’ll receive a certain sum each week, even when you’re not currently on assignment.
- It allows you to sample contractor life without long term commitment
If you’re uncertain that contracting is for you, joining an umbrella is a good way to sample the energy contractor’s You don’t have any commitments beyond seeing out your agreed contract work and if you decide that you want to stop, you don’t have the headache of dismantling an entire company.
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Why should I start a limited company?
- You can maximise your take home pay
The tax allowances afforded to a limited company allow you to optimise the amount of money you keep as take home pay. However, all the burden of managing your personal and corporation taxes falls on you so you’re really earning that extra amount. Contractors with limited companies usually pay themselves a low monthly salary to circumvent being taxed in a high earnings bracket and then top up their earnings with company dividends, which are tax-free, up to a certain limit. If you do go down this route, it’s a very good idea to employ an accountant, especially if you have the added complexity of overseas clients to contend with.
- You can write off certain expenses
Running a limited company means that you can expense certain things, like food, travel, accommodation and work materials like protective equipment.
Ultimately, your choice will depend on how willing you are to ‘go deep’ on the administration of your work and how much time you’re willing to devote to maintaining a company.
Either way, the financial and developmental rewards of becoming a contractor will allow you to pursue your working passions with a level of autonomy and freedom that most people never get to experience.