Umbrella V Limited Company

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

There are a number of things to consider when making this choice. Every contractor in every industry has different needs and circumstances. One size doesn't fit all and so we can help you consider a few key questions including:

  • Are you happy to spend about half an hour a month on my financial admin?
  • Will you be contracting for more than 12 months?
  • Will your contract fall under the IR35 ‘hidden employment’ tax regulation?
  • Are you able to be a Director?
  • Do you earn more than £15 per hour?

If you would like advice tailored to your particular situation then contact our experienced team now. They will be able to answer any questions, help you choose the right service and provide a personal illustration. Call: 0800 121 6513. 

Download the Umbrella Guide to Contracting

Download our NEW IR35 Guide for contractors

Limited Company Option

When you set up a limited company you will become a company director. This gives you a number of options for how you receive payment. You can either take a director's wage or you can get paid through more tax-efficient dividend payments (or a combination of the two).

You will also have the opportunity to claim back business expenses that you can use to offset your tax bill.

Setting up a limited company tends to be more tax efficient than working as an umbrella employee. However it does mean you will have more paperwork and administration. As a director you will some responsibilities that must be taken seriously – particularly those that relate to Companies House and HMRC.

Umbrella Accountants specialise in helping contractors set up and efficiently run a limited company pain free. We have a team of fully-qualified friendly accountants on hand to help you and answer any questions.

One of our most popular small business accountancy services is the provision of the software packages FreeAgent and Xero. These portals make accounting tasks easy such as issuing invoices, filing expenses and paying taxes.

Advantages of Limited Companies:

  • Less taxation so you take home more
  • Longer term company structure
  • Limited financial liability if your company is unsuccessful
  • Greater legitimacy with clients and suppliers
  • Essential if you wish to grow your business

Umbrella Contracting Option

If you choose to become an umbrella contractor then legally speaking you will become an employee of Umbrella.co.uk. Umbrella employees take a more ‘hands-off’ approach to administration and financial management than those who choose to run their own limited company.

Umbrella.co.uk takes control of invoicing, paying taxes and keeping you compliant.  We will also be able to process allowable expenses on your behalf.

Advantages of Umbrella Contracting

  • Full employment rights such as statutory sick pay and statutory maternity pay
  • ‘Hands-off’ approach to administration and management
  • Better access to mortgages and other types of credit
  • Less responsibility and no special legal duties
  • Easy and fast registration
  • Good for short term contracts
  • Good for lower-paying contracts
  • Employee Insurance cover included
  • Generally preferred by employment agencies
  • Get exclusive shopping rewards and discounts from leading UK retailers with Umbrella Rewards

If you want any advice to help inform your decision, please contact a member of our experienced team. Call: 0800 121 651


You really are a star - Thank you for arranging my payslip before Friday.  Its the best news for the day.

Neil D (January 2016)