Those new to the contracting game are often overwhelmed by the huge number of decisions that need to made.  Picking the right umbrella company is just the first of many considerations. And these decisions have to happen quickly - or contractors could lose out on vital work contracts. An umbrella company can help contractors get through the multitude of decisions ahead of their first work placement, but it always helps for new contractors to have an idea of what to expect when they jump head first into the world of freelancing.

The major umbrella company decision that contractors will have to face is whether to use an umbrella or set up a one person limited company. Without any previous experience of contractual obligations and related government legislation, contractors can end up getting very confused - very quickly.

While setting up a one person limited company is a more long-standing solution to the tax issues faced by contractors, the umbrella company solution is a much more innovative option that offers a range of benefits.

Ultimately, the decision resides with the contractor. But, if legal and contractual experience, tax returns and compliance are not strengths, then picking a reliable, reputable and recognisable umbrella company is usually the best way forward.

First and foremost, the use of an umbrella company removes the responsibility of the individual to manage the company in question. This chore is transferred to the umbrella company, which will have a substantial amount of experience in dealing with every issue that could impact upon a new contractor's salary and tax rate.

If a contractor sets up their own limited company, as opposed to opting for a contract with an umbrella company, they become the director of the firm and take full responsibility for all financial transactions.

Moreover, as director of the company, they are responsible for all areas of compliance - which means they need a strong understanding of the government's tax legislation - including IR35.

This is enough to put many people off going freelance at all and the setting up of a limited company, as opposed to using an umbrella company, is definitely one of the biggest barriers to contracting.

Opt for an umbrella company on the other hand, and a professional in the field of self-employment legislation will take responsibility for all tax returns and transactions - this includes complex accountancy issues and compliance with legislation.

All contractors who sign up with an umbrella company have to ensure is that their time sheet is submitted on time. An umbrella company even invoices the employment agency and can chase late payments on behalf of their clients.

First and foremost, the use of an umbrella company removes the responsibility of the individual to manage the company in question. This chore is transferred to the umbrella company, which will have a substantial amount of experience in dealing with every issue that could impact upon a new contractor's salary and tax rate.

If a contractor sets up their own limited company, as opposed to opting for a contract with an umbrella company, they become the director of the firm and take full responsibility for all financial transactions.

Moreover, as director of the company, they are responsible for all areas of compliance - which means they need a strong understanding of the government's tax legislation - including IR35.

This is enough to put many people off going freelance at all and the setting up of a limited company, as opposed to using an umbrella company, is definitely one of the biggest barriers to contracting.

Opt for an umbrella company on the other hand, and a professional in the field of self-employment legislation will take responsibility for all tax returns and transactions - this includes complex accountancy issues and compliance with legislation.

All contractors who sign up with an umbrella company have to ensure is that their time sheet is submitted on time. An umbrella company even invoices the employment agency and can chase late payments on behalf of their clients.