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.



  • Robert was excellent. I recently signed up and he was knowledgeable, helpful and quick to give me the info I needed to make a decision. Great representative of the company who knows his stuff.Rich A. February 2022

  • Very simple and understandable...Christina Parker February 2022

  • Very professional company. Great company, spoke to one of their BDE's, Robert Charlton who was extremely helpful and professional and answered all my questions with aplomb :)Susan Mac Nicol February 2022

  • Great experience so far. Robert Charlton was very helpful with the breakdown of my new contract via umbrella.co.uk. My agency told me this morning that Umbrella.co.uk is quite prompt and will get all my contracts sorted out before COP today and this is the case so I'm very impressed.Yinka Falase February 2022

  • Quick Friendly Easy professional umbrella service. First time I've dealt with an Umbrella company and Josh made the whole process quick and easy. 10/10 thank you for being so helpful explaining everything.John S February 2022

  • I've just signed up with Umbrella and I have to say my first impression of them is excellent! Phone was answered straight away and the assistant, Josh, was so helpful. He was very happy to explain lots of things before asking for any of my personal data - really great initial service. After the call I had a couple of additional things I needed help with. I emailed Josh and got responses back so quickly. So far I am a very happy client indeed!Debs February 2022

  • Emily is a legend, very bright, helpful and full of enthusiasm I hope other staff are similar!David Ryell February 2022

  • Umbrella.co.uk have been very quick to respond to any queries I've had. My personal contact is Lauren, she's been very helpful. I've been with them for 3 months and would recommend them based on my experience so far.Kym January 2022

  • I joined Umbrella as an interim from another company. They have been fab - things happen but they always are prompt, sort it out, v informative. I am v impressed by them. I als feel that I work with a company that cares about its staff.Jane December 2021

  • Due to my own fault I needed a copy of p60 for 2018 and 2019. I mailed Umbrella.co.uk and the following day I received them by email. Thank you Laura Royston and Umbrella - EXCELLENT service. HenrikH Hellkvist November 2021