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Should I use an Umbrella company

Should I use an Umbrella company?

When you are thinking of contracting you have two distinct choices – limited or umbrella company?  In our opinion, this is purely a choice of whether you want to pay more or less tax.

should I use an umbrella companyThe most important thing is that under an umbrella your total take home pay is between 55-65% and under a limited company it is 75-85%.

The truth

Under an umbrella company you will simply be a PAYE employee and you will be paid as an employee.  This means you will pay the full PAYE taxes and Employer’s NI.  On top of this, you will only be allowed to claim a small range of expenses.  It is only really worth using an umbrella company if your contract is for three months or less.

We are aware of many umbrella companies saying that they have special dispensations and that you can claim a “flat rate” amount every day without a receipt.  This is simply not true, and if caught by HMRC, they will come down on you very hard.  If you still want to go down the umbrella path, please choose a reputable firm.

Advantages of limited company over umbrella company

  • Easy to setup – we completely take the stress away of starting out and help you every step of the way.
  • Easy to manage – with our award winning online software, FreeAgent, you only need to spend a few minutes a month updating your system. We take care of the rest.
  • More pay -  more freedom, less stress and more time for the important things in life.*
  • Less fees – umbrella companies are usually more expensive.
  • Flat rate VAT – make £1,000′s profit each year by being on the VAT Flat Rate scheme.

*Limited companies not suitable for contracts of less than £25,000 a year.

Switching made easy

When switching from an umbrella company, we will help you every step of the way and make sure you are trading through your limited company in no time at all.  We have a range of limited company packages for contractors, freelancers and small businesses.

Any questions? Speak to one of our friendly accountants on 020 7969 2879.