Limited or Umbrella?
At Dolan Accountancy, we don’t believe you should be forced down either route, so for £95 + VAT per month, we will advise you on the most tax efficient way for you to operate, for each contract you sign up to. We have many contractors who work simultaneously through umbrella employment and their limited company.
So, what are the differences and which way of working do you think would suit you best?
There are two options. The first is to become a Director of your own Limited Company. As Director, you are responsible for the company’s paperwork, accounts and taxes. Your company is a separate legal entity to yourself – so the client pays the company and the company pays you.
The second option is to become employed by an Umbrella Company. As an employer, the Umbrella Company is responsible for all paperwork and taxes, as well as insuring you and providing you with employment rights. The Umbrella Company acts as an intermediary – so the client will pay the Umbrella Company, who takes a margin, pays all required taxes/NI and then pays you.
The two options are quite different and the best one depends on your own circumstances. So, which is the right choice for you?
In general, a Limited Company is the best option for anybody who:
- Earns over £25,000 per year, or £100 per day
- Expects to contract longer-term
- Wants to maximise their take-home pay and doesn’t mind a bit of extra admin to achieve this
- Wants to work for themselves, with complete control over their own finances
We would recommend an Umbrella Company for anybody who:
- Earns less than £25,000 per year, or £100 per day
- Is contracting short-term, or doesn’t know if they’ll continue contracting in future
- Wants to be paid with the minimum of hassle and paperwork
However, everybody’s circumstances are different. There may be a reason to set up a Limited Company on a lower yearly income, or reasons to prefer an umbrella company even for higher-rate contracting. Our experts would be happy to discuss the right choice for you – if you would like more information, please call us on 01442 795 100 or email: firstname.lastname@example.org.