Contracting
Limited Company
For many contractors, contracting through a limited company represents one of the most tax-efficient methods to be paid. Setting up your own limited company may be the most efficient way for you to work, whether you're just starting out as a contractor or freelancer or have been working for a while under an umbrella corporation. A limited firm can be formed in a variety of ways, but employing a professional contractor accountant can help you avoid some of the administrative problems and paperwork that come with running one. Learn about limited companies and why they may be the ideal contractor payroll solution for you.
PAYE Umbrella
Using an umbrella corporation is the simplest way to get paid. It's simple to sign up for an umbrella company, and once you do, you're an employee of the umbrella company. With this payroll option, there is no need to establish up your own firm or deal with any administrative responsibilities other than submitting timesheets. Your umbrella payroll provider will manage all taxes, including income tax and national insurance. When you select this option, you will not be subject to IR35 restrictions. Umbrella enterprises, on the other hand, are not the most tax-efficient, and if you have the option of contracting through a limited company, you may be able to increase your net pay.
Umbrella Company vs. Limited Company: Pros and Cons Summary
Tax Efficiency
LIMITED
The most tax-efficient method of contracting. The majority of directors work for a low income. Dividends are not subject to National Insurance, and other tax planning alternatives are available.
UMBRELLA
PAYE taxes your entire salary. Working through a limited business is less tax efficient.
Ease of set up and use
LIMITED
Company incorporation can be accomplished in a few hours, but tax registration (VAT, Corporation Tax) can take several weeks. Monthly accounting administration is essential, as are some annual requirements as a company director.
UMBRELLA
Instant setup, minimal administration, and no legal obligations.
IR35 Consideration
LIMITED
Excellent if you intend to serve several clients. The possibility of being blanketed. If caught, the majority of the tax benefits of being limited are forfeited.
UMBRELLA
Because you are already taxed as a 'employee,' IR35 is irrelevant. Not great if you intend to work for multiple clients concurrently.
Duration
LIMITED
Due of the administrative work required to set up and then shut the company, it is not suitable for short-term contracts.
UMBRELLA
Excellent for short-term contracts.
Low earning contracts
LIMITED
Contracts paying less than £15-20/hour are usually not suggested.
UMBRELLA
Excellent for lower-paying contracts.
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When selecting a payroll service, many first-time contractors want to know how much money they may take home. If you work for a limited company rather than an umbrella company, use our take home pay calculator to determine how much money you’ll get at the end of the week or month. We are delighted to have assisted over a thousand clients thus far, so you can be confident that you are in excellent hands, as our priorities have always been customer service and compliance. When you speak with our experts, you will receive professional and personalised advice to help you get started with contracting on the right foot. Our first-time contractor services include:
- Outline the best payroll option for you.
- Complete administrative assistance.
- Limitless tax guidance.
- There are no minimum service terms.
- 24/7 access to a safe, mobile-friendly gateway.
- Free consultation to go through your condition and needs.
- Explaining the basics of IR35 legislation and how it affects contractors.
- A dedicated team is available to answer your questions.