Umbrella Vs Limited
New to contracting   |   Umbrella

Umbrella Vs Limited

Limited Company vs PAYE Umbrella

When you start a contracting career it can be difficult to know whether joining an umbrella company or setting up a limited company is the right option for your circumstances.

There’s a big difference in the amount of responsibility you would have to take on, and which benefits you gain from each route. Understanding the advantages and disadvantages is important to ensure you make the right contracting decision.

eQuidity have created the simple table below to outline the key differences between the two options:

Limited Company

PAYE Umbrella

Advantages

Advantages

The most tax efficient way of working.

Very easy to use, you simply enter your timesheet and expense details and wait to be paid.

Claim a wider range of expenses

All tax and NI is deducted before you receive your money, so you will have no further taxes to pay.

Access to the Flat Rate VAT scheme.

Ideal for short term contracts.

You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator.

Ideal for contracts less than £30k per year.

Running your own business isn't difficult; submit spreadsheets to your accountant - just like umbrella time-sheets and expenses.

Good if you are unsure if contracting is for you.

Greater opportunity for tax planning than PAYE Umbrella

Someone else will be doing all the paperwork and Credit Control.

Negatives

Negatives

There is a certain amount of paperwork involved, usually about 10 - 15 minutes per month.

You will receive a salary that is subject to full PAYE Tax and NIC’s.

Can be costly if you contract for a very short period of time, then go back to permanent employment.

Types of business expenses that can be claimed are not as many as Limited Company.

Not ideal for contracts less than £30k per year.

Not as tax efficient for greater earnings. Generally +£30-£40k per annum Limited Company would be better for tax purposes.

Need More Help?

We hope the above table explains the key differences between umbrella and limited company options. If you would like more advice, or are still unsure about which route is right for you, the friendly team at eQuidity are here to help.

We’re committed to supporting you all the way through your career, and always fit our services around your lifestyle. Our online portal lets you submit your timesheets and expenses any time day or night, allowing you to get on with your work during the day. On top of that our dedicated team of advisers are on hand to offer assistance whenever you need help.

If you’ve decided to go down the limited route, you’ll be in safe hands. We can incorporate a Ltd company for you within 3 hours of getting the go ahead.

For more information, or to join us, please call 03333 585 222 or email enquiries@eQuidity.co.uk

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