Own Limited or Umbrella Company? Avenues and alleyways.
OrangeGenie provide an insightful overview on managing your affairs as a contractor.
Contracting and freelancing work is available across most industry sectors, whether you are a supply teacher, an IT expert or work in the automotive industry for example, you can decide the best route for managing your career in a compliant and professional manner.
Ensuring tax efficiency, whilst maximising your income and ensuring your projects are delivered seamlessly is an obvious consideration, however, there are many advantages and disadvantages to setting up your own Limited Company or working for an Umbrella company, depending on your individual circumstances.
If you do decide to make that all important decision and move from permanent employment into the contracting or freelancing world, there will be several considerations to weigh up.
The Individual
Many people base their decisions on personal preference, life choice and expectations, for example, if you opt for your own Limited Company status, where you will become a Director and a Shareholder of the company, this can be a tax efficient way of working with the various benefits that are on offer. Running a Limited Company also gives you complete control over your financial affairs and doesn’t need to be complicated, especially if you choose a good specialist accountant.
Alternatively, you can work via an Umbrella company which means you will become a PAYE employee again. The Umbrella company employs you and enters into a contract to provide your services to a client which means they will take full responsibility for all the administration, invoicing, payment chases and of course paying you, the contractor - less the appropriate tax and National Insurance deductions.
What’s in it for me?
One advantage when opting to work for an Umbrella company is that it provides a sensible option for contractors who may not wish to immediately set up their own Limited Company. This approach offers flexibility to concentrate on your day-to-day working activities, safe in the knowledge that someone else is being paid to look after the paperwork.
If you are looking to maximise your income, then the formation of a Limited Company could be your strongest option. This may enable you to take home more than 80% of the contract income; a big difference to the lower approximate amount of 65% of contract income you could take home using an Umbrella company.
Ultimately, the decision is yours and it depends on individual factors and requirements. Both Own Limited Company and Umbrella have their own set of pros and cons, but you need to find the path that is right for you and ensure you choose a reputable company to work with.
Final Tip
Your decision may be aided by consulting with Umbrella companies and/or Accountants who specialise in supporting contractors with their own Limited Company.
This should give you the necessary impartial advice and help you to gain a fuller understanding of the available options. You must be confident with whom you will be working with and that they are fully qualified to manage your tax affairs with no hidden costs or agenda.
Making the decision whether you opt for your own Limited Company or choose an Umbrella Company is an on-going industry debate. OrangeGenie (providers of both services) will be issuing a number of articles over the coming weeks, so don’t forget to subscribe to our blog and comment on our posts.
About OrangeGenie
OrangeGenie provide professional contractor services for contractors and freelance people in the workplace. They provide services, guidance and information to help UK contractors to make an informed decision when choosing limited company services or umbrella company services, depending on the needs of the individual.
OrangeGenie are a leading UK limited company and umbrella company services organisation who will guide you every step of the way to manage your business, the way you want it.
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Contact Information
© Genie Management Group 2012
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