So, which trading structure should I choose? Limited or Umbrella Company?
Often the answer lies in your motivation for deciding to become a in the first place. The vast majority of Contractors leave employment and join the world of contracting in order to increase their net income; contracting rather than employment gives the opportunity for greater earning potential for the same number of hours worked, but also potentially the ability to keep more of what you earn.
What you chose can depend on a number of things such as how long you intend to contract, how much you will earn per annum, how much administrative responsibility you want to take on and what costs you have to pay in set up and administration and can even depend on whether you fall inside or outside IR35 regulations. For a simple comparison see our summary below:
Trading Structures (at beginning)
Limited Company - you become a director and shareholder so have complete control. You pay yourself a small salary and draw rest of what you decide to pay yourself (which are not subject to National Insurance (NI) contributions. )
Umbrella Company - they contract directly with your client or agency and employ you on a PAYE basis. They are responsible for invoicing, calculating tax and national insurance (NI) contributions.
Cost (at the end)
Limited Company - accountancy fees for set up and running a limited Company compare favorably with Umbrella Company service charges,
Umbrella Company – Charges can be expensive compared to Limited companies set up and running costs.
Fraser Russell have helped numerous contractors set up their limited companies so they can start working straight away. We have a dedicated team who help you at every step of the way so you fully understand your responsibilities and ensure you operate as a compliant contractor and avoid any unnecessary and often expensive penalties imposed by the HMRC.
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Let us take the hassle out of Contracting and get you set up today by Contacting Us or calling on 0121 . Although based in Birmingham, West Midlands, our Contractor services are used by clients throughout the whole of the UK and beyond. Don’t forget to subscribe to our 647 5030Newsletter for all the latest updates and please feel free to interact with us via our Social Media sites and Blog.