Umbrella Company or Limited Company?

Umbrella companies are simple, efficient and stress free

Joining an umbrella company is the best option for you if any of the following apply:

  • You earn less than £25,000 per annum
  • Are on a short contract
  • You only plan to contract in the short term
  • You are new to contracting
  • You have a contract and need to be up and running quickly
  • You’re not ready to commit to running a limited company

One of the main benefits of contracting via a limited company is that it is the most tax-efficient way to operate. Unlike a permanent or umbrella employee, you pay yourself in the form of a basic salary (typically low), and the remainder is drawn down in the form of dividends. Dividends are not subject to National Insurance Contributions, which results in a significant tax saving.

Umbrella Company vs Limited Company

Umbrella Company

  • Flexible – ideal for short contracts
  • No tax returns - PAYE Payroll takes care of all your tax and NI contributions for you
  • Minimal Admin - your only responsibility is to submit your timesheet
  • Pay weekly or monthly fees
  • No IR35 obligations as you are legally an employee
  • Up and running within 24 hours
  • Fewer tax relief options
  • Little control over the administration
  • Covered by the umbrella's insurance policies
  • Great for lower paid contracts

Limited Company

  • Better for longer term contracting work
  • You are responsible for submitting your own tax returns and financial records to HMRC and Companies House
  • You can claim tax relief on more business expenses
  • Pay accountant and legal fees
  • Must follow IR35 regulation
  • Takes more time and work to set up
  • More tax relief options - Potential to keep more of your earnings
  • Much greater control over your business
  • Must take out your own insurance policies
  • Only sustainable for higher paid contracts
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Umbrella Company or Limited Company?

Umbrella companies are simple, efficient and stress free

Joining an umbrella company is the best option for you if any of the following apply:

  • You earn less than £25,000 per annum
  • Are on a short contract
  • You only plan to contract in the short term
  • You are new to contracting
  • You have a contract and need to be up and running quickly
  • You’re not ready to commit to running a limited company

One of the main benefits of contracting via a limited company is that it is the most tax-efficient way to operate. Unlike a permanent or umbrella employee, you pay yourself in the form of a basic salary (typically low), and the remainder is drawn down in the form of dividends. Dividends are not subject to National Insurance Contributions, which results in a significant tax saving.

Umbrella Company vs Limited Company

Umbrella Company

  • Flexible – ideal for short contracts
  • No tax returns - PAYE Payroll takes care of all your tax and NI contributions for you
  • Minimal Admin - your only responsibility is to submit your timesheet
  • Pay weekly or monthly fees
  • No IR35 obligations as you are legally an employee
  • Up and running within 24 hours
  • Fewer tax relief options
  • Little control over the administration
  • Covered by the umbrella's insurance policies
  • Great for lower paid contracts

Limited Company

  • Better for longer term contracting work
  • You are responsible for submitting your own tax returns and financial records to HMRC and Companies House
  • You can claim tax relief on more business expenses
  • Pay accountant and legal fees
  • Must follow IR35 regulation
  • Takes more time and work to set up
  • More tax relief options - Potential to keep more of your earnings
  • Much greater control over your business
  • Must take out your own insurance policies
  • Only sustainable for higher paid contracts
Read More

The quickest way to get
the best take home pay

Stop losing your hard earned cash!

Fill in your details below and start saving now!

Your information is safe: Privacy Policy