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

If you are 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 is 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 is why it is 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.


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 of 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.

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

We offer specialist contractor accountancy services

Whether you're new to contracting or are a seasoned contractor looking to switch, our accountancy division CloudAccountant has the perfect solution for your needs. Call: 0800 121 6513 or visit our accountancy services division to find out more.


Contracting through an Umbrella Company

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

You will carry out work for your client or agency and submit timesheets on a weekly or monthly basis. The umbrella company will deduct employment costs from the invoice value, along with their company margin. They will then process and deduct employee tax and National Insurance (NI) 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.



  • Great service (from Nicholas Ginindza) and extremely professional. He really took his time to explain every detail of my income, tax owed and other details such as expense claims. For someone who isn’t great with numbers and quite new to the Ltd company accounting process, he made it extremely easy to follow.Mina February 2023

  • I would recommend James and Ellie to anyone. As a consultant who's candidates get paid weekly. Im very lucky that because I primarily use Umbrella.co.uk - I very rarely have any issues. Having happy candidates as a recruiter means that they will stay in their contracts for longer. James and Ellie are always very friendly and from what I've heard from my candidates, they are very thorough with them as well. Genuinely wouldn't refer to anyone else!Maddie Ryan February 2023

  • Excellent company and very professional team.Sebin Angadickal February 2023

  • I have used Umbrella Ltd in the past and they have always provided me with a very good service. They are readily contactable and you always get to speak with a person. All my payments and queries are handled promptly and with the minimum of fuss. I would certainly recommend.Diane February 2023

  • Knowledgeable People!! Couldn’t recommend this company enough!! All the staff are very knowledgeable and helpful. Would definitely recommend them to anyone.June B February 2023

  • Great Company, Great Experience. The umbrella company have been my payroll company since the start of the year. I have the best customer experience during this time. Robert Charlton I deal with is not only a credit to himself but to the company in how he responds to his emails very efficiently and respectfully but also putting at ease any worries with a Simple phone call too. Would highly recommend Umbrella for payroll needs and any worries I would certainly ask for Robert.Colin Robertson February 2023

  • Umbrella Company is the best. The registration was easy and clear explanation on how they operate. Questions were answered satisfactorily. I am so pleased to be receiving a service from Umbrella because it is a very reputable company.Tracey Fuller February 2023

  • I have just joined Umbrella.co.uk. So far the support and service I have received from Robert Charlton has been great.Kim Elliot February 2023

  • Efficient and effective. Clear and concise information.Norma March 2023

  • I have had a great experience with Umbrella. They have always been really helpful with any queries I have had and I have not had any problems in regards to my payroll. Everything has always been completed on time with no delays. I highly recommend umbrella.Jodie March 2023