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There are a few different options when it comes to how you want to contract as a self-employed professional. But what happens if you change your mind and want to try another type of contracting, such as going from an umbrella company to a limited company?

Umbrella company vs limited company

An umbrella company employs a temporary worker on behalf of an employment agency and the agency then provides the services of the worker to their clients.

It’s a self-employed route ideal for those who want some of the perks of being self-employed, such as flexibility with a better work-life balance, but don’t want to deal with the admin side of running a business.

It’s also a path much better suited for those who expect to earn less than £25,000 per year (or £100 per day) and who are only planning to contract on a short-term basis.

A limited company, however, is for those who wish to have complete control over a business and their career, are in it for the long term and expect to earn £25,000+ per year. They also need to be happy to take on the additional responsibilities that come with running a company.

For more information on this, take a look at our Limited vs Umbrella page.

Umbrella company to limited company

A lot of people will choose the umbrella route first when they become self-employed – it’s appealing for those who have just left permanent employment and are new to the contracting world, as it isn’t quite as much of a leap compared to other avenues and it offers some of the added security found with traditional employment.

Going from umbrella contracting to running your own limited company is a fairly easy procedure.

You’ll just need to notify your umbrella company that you wish to leave – it’s usually best to round your last day off at the end of a week or month, if possible.

It’s also really important that you sort out any holiday pay that you may be owed from your umbrella. Because of the way that umbrella holiday pay works, you may have accrued your pay, meaning you could be owed quite a bit.

You’ll then need to start the process of setting up your limited company, which includes:

  • Picking a company name
  • Choosing a director and potentially a company secretary
  • Choosing shareholders/guarantors
  • Registering your company

Other contracting options

Apart from umbrella and limited company contracting, there are a couple of other self-employed structures you can choose from:

Limited Liability Partnerships
A Limited Liability Partnership (LLP) is somewhat similar to a limited company; it’s a way for two or more people to come together to carry out business projects and activities.

Many people choose this route because joining with a business partner means you can put your individual skills and expertise together, as well as spread the level of risk that comes with running a company.

Take a look at our Limited Liability Partnerships page for a more in-depth look at how this works.

Sole trader
A sole trader runs their own business – registering as self-employed and reporting their income, expenses and tax to HMRC on a self-assessment tax return.

Unlike a limited company contractor, a sole trader is not a separate legal entity, which means they are personally liable for any debts or losses incurred by their business.

Read our How to set up as a Sole Trader page for more information on this.

If you’d like to sign up or need any further information, please call one our friendly experts on 01206 591 000 or email Jaime at jaime.thorpe@contractorumbrella.com.

Why Thousands of Contractors Choose Dolan Accountancy

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust.

Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £125 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams
  • Free Access to FreeAgent – We offer all of our clients access to FreeAgent, free of charge
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few
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