Limited company vs Umbrella

What are the differences between an Umbrella and limited company structure

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Working as a contractor can be a very rewarding career path, giving you flexibility, varied career options and potentially better take-home pay. However it is important, before you start, that you consider all your options and ensuring you have fully understood the differences between them.

At JSA, we are experts at both limited company accounting and Umbrella employment and therefore can provide unbiased bespoke advice based upon your individual requirements.

Limited Company

What is it?

A separate legal entity that you run as a director and shareholder. You will need a business bank account and the company will pay its own taxes. You will need to declare wages and dividends as your salary payments. A limited company is flexible but can involve an administration burden.

Set Up

Takes longer, there’s more paperwork involved and you will also need to go through the process of registering a business bank account.

Take-home pay

Generally, this will provide you the best take-home pay as you will take money from the company as wages and dividends.

Administration

You will be responsible for filing various company documents with HMRC and Companies House, plus ensure all taxes are paid on time.

Control

As you will be a director and shareholder, you will control the future of the company and consquentially your own career. You are free to take on more contracts and do other work.

Umbrella Solutions

What is it?

You will become an employee of the Umbrella company. All your taxes and National Insurance contributions are taken care of and you will receive a net salary each week, or month based upon the hours worked. This structure is simple and involves the least amount of administration work.

Set Up

Except for the initial registration process, setting up with the Umbrella company involves very little else and therefore is quick and simple to set up.

Take-home pay

The Umbrella company will deduct tax and National Insurance from your pay. The level of take-home pay will generally work out less than as a limited company.

Administration

Apart from going through the registration process and uploading your timesheets, there is little else you need to be involved with.

Control

Limited ability to control your rates of pay and methods of payment, which will always be PAYE.

The differences between a limited company and Umbrella company

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