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.



  • I would like to thank Liz Dunlop for the excellent customer service she provided for this week. She was very knowledgeable and informative. Her manor was very professional and encouraging and approachable I will say an asset to your company. She provided me with my documents and payslips with no trouble at all. Please thank her me.Joseph P 23 Sep 2020

  • I have been with Umbrella for 2.5 months and have always received exceptional customer service. A few days ago, I had a query with understanding the payslips. I contacted umbrella one evening and received a call the next morning offering assistance. I was put through to Ciara who provided such excellent support - she explained everything so thoroughly and in laymans terms without leaving me feeling silly for asking. My enquiry was resolved in a matter of minutes and in such a polite and professional way. I could not have asked for better service!L Smith 18 Sep 2020

  • Excellent customer service and prompt action taken. Called about an issue regarding payslips, spoke with Laura who was lovely and helped me resolve this issue without fuss. Can highly recommend Umbrella having used them for 12 months now. Payments always on time which is fundamentally the key aspect.Stuart 17 Sep 2020

  • This is the second time I'm used Umbrella.co.uk over the course of the last decade, and both times they've been excellent. They're efficient, friendly, and reliable, and I couldn't be happier. A particular shout out to Emma, Aidan, Suzie, and Ciara who have all gone the extra mile when I've needed them. They've been absolute stars!Martin 16 Sep 2020

  • Sarah Postlethwaite has been beyond helpful with my queries. Her and the team are always polite and resolved my queries quickly and efficiently.CsS 16 Sep 2020

  • I’ve been with Umbrella for a year. Had nothing but a positive experience. Sarah & her team are fantastic. Paid on time and had no problems.Lucy A 16 Sep 2020

  • First time contractor and Umbrella were recommended to me. They were very helpful, always courteous and professional. I was always paid on time, with clear breakdown of deductions. Any queries swiftly and carefully resolved by them. Will use again in future for my next contract. Really good overall service.T Ellis 9 Sep 2020

  • Umbrella has been great, the consultant called Aiden was really helpful at explaining every thing to me as I had never used a company like this before. I was paid on time and had no problems, would recommend them.Kate R 4 Sep 2020

  • Had a very helpful and, for me, a pretty amazing experience with Daisy Birch who helped me with some p60 issues. Very fast,very helpful, and actually waited until I had both confirmed I had received her emails before we ended the conversation, not just "I'll get that done and goodbye" and actual nice person willing to seeLondon Assessor 25 Aug 2020

  • I am very happy with the customer care and service I experienced as a employee paid via Umbrella. Laid off due to site shutdown, essential because of the corona virus pandemic lockdown, I had only worked one month of a six month contract. I was advised I was entitled to Furlough by Umbrella, who worked hard to arrange this for relevant contracted workers. Although payment process was slow, Peter Langham and staff kept me regularly updated of progress, any issues arising causing delays and supported with reassuring they were working hard to resolve. I have already thanked all those involved who maintained communication, answered any queries and were generally accomodating during the challenges of 2020. I have started a new role and requesting my P45 etc again received great customer care and a speedy response from Ciara Morris. Thanks again to all who helped manage and arrange furlough.Lisa Z 18 Aug 2020