Umbrella v Limited Company

If you’re new to contracting then you have to choose a contractor option that's best for you

Umbrella v Limited Company: What’s Best for Me?

If you’re new to contracting, it’s important you choose the right payment solution to suit your needs and remain compliant.

Most people start contracting because they want more money or more flexibility over how they work. But choosing between an umbrella company or your own limited company can be influenced by:

  • Your take home pay
  • Your legal responsibility to HMRC and remaining compliant with legislation such as IR35
  • Your level of control over how and when work gets completed

There’s no one-size-fits-all arrangement for contractors and the relative benefits and drawbacks of umbrella and limited company contracting have changed significantly in recent years with the introduction of new legislation. That’s why it’s vital you seek professional advice before choosing between the two.

At Umbrella.co.uk, we have the systems and people in place to support you as a limited company or umbrella contractor.

For personal advice, speak to a member of the team today. Call: 0800 121 6513.

Download our guide to contracting

Download our IR35 guide for Ltd contractors

Contracting through a Limited Company

When you operate through a limited company, your business becomes a separate legal entity, with you as the director.

This gives you more options over how you pay yourself and means you can take advantage over lower taxes on dividends.

In short, working through a limited company could be more tax efficient and could increase your take home pay. But it also involves a little more work for you and the financial advantages have been reduced in recent years, particularly if you’re caught out by further changes to IR35 legislation from April 2020.

You might think about a Limited Company if:

  • You want to be tax efficient yet remain compliant
  • You don’t mind some extra admin work
  • You are not caught out by IR35 rules
  • You have plans to grow your business or you want more legitimacy with clients and suppliers

A member of the Umbrella.co.uk team can help you decide if a limited company is right for you. Call: 0800 121 6513.

Contracting through an Umbrella Company

When you contract through an umbrella company, legally speaking you’ll become an ‘employee’ of the umbrella company and go on their payroll.

You’ll carry out work for your client or agency and submit timesheets on a weekly or monthly basis. The umbrella company will then deduct taxes, National Insurance contributions and a margin before paying your salary into your bank account.

If you are a higher earning contractor, this type of contracting isn’t often as tax efficient as working through a limited company, but it is hassle-free and gives you flexibility with less commitment as a company director.

Umbrella company contractors are also entitled to full statutory employment rights that limited company contractors don’t get and an umbrella company can potentially help you claim certain allowable expenses.

You might think about an Umbrella Company if:

  • You don’t want the hassle that comes with setting up and managing a limited company
  • Employment tenure is important to you
  • You are only going to be contracting for a short time
  • You want to use the ‘safe’ option
  • You are working with an agency
  • You are likely to be caught out by IR35
  • You want the convenience of flexible pension options; workplace pension or salary sacrifice
  • You want to take advantage of employee reward schemes

A member of the Umbrella.co.uk team can help you decide if an umbrella solution is right for you. Call: 0800 121 6513.



  • My experience with Umbrella.co.uk was visibly clear and professional with the movement of my wages and pension contribution.Greg Thomas October 2021

  • Excellent Service Delivery & Client Care I was having some problems with a partial pension transfer I wanted to do, I raised it with Umbrella and Christel stepped in. She was an absolute star in handling the issue . Very knowledgeable, prompt, proactive, empathetic, thoughtful , follows through - I could go on and on about her excellent client care. She saw to it that my matter was sorted out at the right level . I wish we had many more Christels - she is an excellent asset to any organisation .Olubunmi October 2021

  • I had to find an umbrella company quickly and was very happy with this choice. They are very helpful in particular Christel in the pensions team was very attentive in resolving a problem I was having. She communicated at every stage until the issue was resolved.Janet Russell October 2021

  • Ciara Morris - Excellent customer service / support provided today. The first great experience with Umbrella, thank you.Deji Dosumu September 2021

  • Very good company to go through! Special thanks to rob charlton for the friendly and good customer service! Top lad and explained everything clearly and quickly to do with the company!Ian July 2021

  • I have been dealing with Robert​ Charlton from umbrella.co.uk and he has been an excellent help. His calculations for salary sacrifice have helped me see how I could save thousands in tax. I know he can't give me advice, and I'm not asking for any, but the information and his efficiency has already saved me days of working them out in spreadsheets (which is what I had to do last year) and I will definitely save ££££ over the year. Thank god I moved from another umbrella company to them, this service alone has been worth it !M Shah August 2021

  • Christel, was great. All my questions were answered with great detail. Who highly recommended using Christel. I couldn’t have asked for anymore.Ian Jimmy August 2021

  • Robert Charlton is my contact, was extremely helpful, very knowledgeable, explained everything very thoroughly. Looking around at some of the other umbrellas, it's a bit wild west out there, but I feel like Umbrella.co.uk are doing it right, and are one you can trust.Richard Norris August 2021

  • I had an issue with a payment “I didn’t get it” phoned umbrella and spoke to Robert, and within a few hours the payment was in my bank account. Well done umbrella and Robert.Ian August 2021

  • Alex Palazzo is very polite and calm. His customer service is exceptional and second to none. I will recommend him and Umbrella Company Limited to friend and family. Thank you Alex for your first class customer service.Elizabeth July 2021