First 6 months contracting

I’ve just started my 6th month as a contractor, and wanted to share some notes around the practicalities of being employed inside IR35.

Inside IR35

I’m writing this from the perspective of being inside IR35.

This means that I'm not self-employed, or running my own business. I'm employed by an Umbrella company who sort my pay, tax, pension and liability insurance (for a weekly fee).

A big chunk of my daily rate disappears before it comes to me, but I don't need to worry about saving for my tax bill or much of the paperwork associated with running a business or limited company.

Inside IR35 daily rates tend to be higher too, which helps to balance out the fact that the tax situation is less favourable.

All in all, I'm happy with the arrangement.

(By the way, I’m certainly not an expert in all of this so please get professional advice before acting on my notes.)

Contract extensions

I was initially contracted for 3 months, then I got a further 6 month extension. I think there’s a chance of further extension, but I’m not sure, I need to start looking into it. I'm happy that my first contract is on track to be 9 months. It seems like the maximum length for these types of contracts is 2 years, but again, I'm not sure.

My current contract takes me to early January, and December’s pay will be light given that I’m planning on taking around 2 weeks off. So planning ahead is essential.

Worth saying that my department is furloughing contractors over Christmas for at least 2 weeks. Meaning that we’ll be forced to take time off. I’m okay with this as I like taking time off at Christmas, though I’m sure others might be less happy with this.

Holidays and annual leave

I’m on track to take about 40 days of holiday this year, including bank holidays. I think this is generous but hopefully not too extravagant.

I was 40 years old this year, so there were a lot of reasons to take time off here and there. But I’m also the kind of person who always uses up all of their leave so I’ll probably do the same next year.

As an inside IR35 contractor you don’t get paid if you don’t work. So I need to put aside money to cover those days in advance. I think some umbrella companies can keep money aside for you, but I’ve opted to have it all paid to me upfront so I can keep it in a savings account.

Working days

The amount of days I end up working is different each month. It varies from 14 to 20 days depending the month and how much leave I take. About 18 seems normal. So pay can go up and down each month.

Pay day and time sheets

Pay day each month can vary which can be tricky to get used to. I put my time sheets into my recruitment agency’s system at the end of the month.

This is then sent to my line manager for approval. The money goes from my place of work, through my agency, to my umbrella company. The umbrella company then pay me on the first Friday of the following month. In reality this means that I get payed somewhere between the 1st and the 8th of the month after I’ve worked.

When I started, I spent some time moving all my direct debits to later in the month (where possible) so they all leave my account after my latest possible pay day.


I've had more stress from expenses than anything else since starting contracting. Even though my current contract is remote, I'm encouraged to visit my office for meetings (like end of sprint ceremonies), and operational locations for user research.

I think travelling around once a week would be acceptable to my managers. In reality I've made 2 trips to London to since starting. I'd like to take a few more, perhaps a couple a month.

There are 2 routes for me to cover the costs…

  1. I can ask my manager (or any permanent civil servant on my team) to book the travel and accommodation for me. This is easy enough for me, but I don't like putting the hassle onto others. Nobody likes using that system.
  2. Pay for it myself, then claim it back.

I've tried both, but claiming it back later doesn't seem to work very well so far. Just like my time sheets, expenses have to be entered into my recruitment agency's system, then approved by my line manager before the funds can get to me, via my umbrella company.

Even though it seems pretty clear to me that this is an allowable expense, my Umbrella company, needed to do an ad-hoc investigation into it, to make sure they are satisfying HMRC's rules. If the expense isn't deemed allowable, then it's taxed like income.

The upshot is, I've been out of pocket for weeks. I've heard horror stories about others who have lost out much more, and waited too long to act and now may never get the full amount back.

My advice it to be wary about expenses!

In the end though, I count myself very lucky that I’m able to work this way and to earn good money, doing a job I enjoy. I'm paid well enough that I can afford to be out of pocket for a little while. So it's more the frustration about not being 100% clear what's happening to the money and taxes, rather than worrying about being out of pocket.

Next time

Next time I'd like to blog more about savings (as a contractor you need to put a lot aside) and benefits (as a contractor you don't get many employment benefits).