Limited or Umbrella Company 

There are many reasons contractors and freelancers choose to run their own limited company. Businesses will often take a company more seriously than an individual, helping you land significant contracts and negotiate better terms. You maintain full financial control, raise invoices on your own behalf, manage your company bank account, holding back and then paying your own taxes. Plus, your money doesn't pass through a 3rd party.

When you operate through a limited company, your liability is limited to the company. Recruitment agencies will not hesitate to engage your services, whereas they will often have red tape to get through for new umbrellas and won’t take on self-employed contractors at all. A limited company also comes with major tax-planning advantages; our contractor calculator can illustrate the financial difference between using an umbrella versus your own contractorlimited.co.uk company.

There are some extra responsibilities that come with running your own company, but by engaging ContractorLimited.co.uk many of these can be removed from you. Our service includes setting up your company free of charge and taking care of your company’s tax-planning and accounting requirements. Our online contractor accounting software makes managing your company as hassle-free as can be. Arrange an online demo to see for yourself.

Another option available to contractors is the umbrella company. This allows contractors to claim tax-relief on most of the same expenses as those operating a limited company, but removes the ability to pay in dividends, increasing National Insurance Contributions dramatically. Despite these disadvantages, an umbrella offers a simple solution that may be used as and when required irrespective of your IR35 status.

An umbrella company is a good option if:

• You only have a short term contract and don’t expect to continue contracting after

There are year-long costs and responsibilities associated with running your own company. These are insignificant when compared with the benefit of operating a company for all or most of a year, however you should think carefully before starting a company with only a short term contract in place.

• You are caught by IR35

Although this doesn’t prevent you from running your own limited company, it removes the main tax-advantage – the ability to pay yourself in dividends and the humble umbrella may be the best option.

Take advice first. It is always worth talking to an expert about your IR35 status, if you are genuinely caught and unable to change the way you operate our consultants can recommend some excellent umbrella services. Read more about IR35 or call us on 0845 051 1902 now.