When it comes to deciding between Limited and Umbrella companies there’s several things you must consider before making the jump. Start off by looking at why you left traditional employment as Umbrella and Limited have a big difference in the amount of responsibility you’d have to take on.
It can be difficult to make the choice alone, so we’re here to help! At Brookson we have years of experience and have helped hundreds of contractors like yourself make contracting a lifelong venture.
Differences Between The Two
Limited and Umbrella are quite different in the ways that you would work, with each having differing levels of responsibilities and risk.
With Umbrella companies you have little control over your business and how you’re paid but you’re free from common contractor headaches such as client negotiation, chasing late payments, invoicing, accountancy and many levels of administration. You’re effectively paid like an employer and must submit timesheets which are then invoiced to your agent. A huge problem for many contractors is IR35, contractor specific legislation that could remove the financial benefits of being a contractor all together if you’re caught by it. But as an Umbrella you’re not affected by this at all, it only affects Limited companies, so the worry is gone all together!
Limited companies have much more control and responsibility over the company as you’re the director. You get to take the company in any direction you like but must do the majority of the legwork yourself. Working as a Limited company is much more tax efficient than working under an Umbrella, so is a huge draw for many people. This comes with the threat of breaching IR35 rules, if you have no knowledge of this yourself, it’s vital you speak to a contractor accountant to ensure that the contracts you choose to work adhere to IR35 rules. Limited companies also take much longer to setup as it can often take weeks to register for taxes compared to Umbrella companies where it’s usually instantaneous.
If you’d like to know more about Umbrella and Limited companies then speak to our specialist advisors today and we’ll help you make the right choice!