Umbrella companies can be less hassle than limited companies, but at what cost? Choosing an umbrella company is often easier, but isn’t usually the most tax efficient way of working.
When working through an umbrella company, all tax and National Insurance is deducted before you receive your pay. Many first time contractors choose to trade through an umbrella company as this way of working is associated with simplicity and speed; however some contractor accountants can make the set up and maintenance of limited companies quick and hassle free.
An umbrella company is ideal for short term contracts and can keep the finances of individual contracts self-contained. If you decide to work through an umbrella company your salary will be subject to full PAYE Tax and National Insurance which will have negative financial implications. Another point to consider is that you will be reliant upon the umbrella company to collect your money from the client or agent and then to pay it for you.
Ultimately the decision comes down to your own personal choice and you will need to weigh up what is most important to you – taking home less money through an umbrella company vs. more time spent managing and directing a limited company.
When you engage Churchill Knight & Associates Ltd as your accountant you will be advised on your best option, dependent on your personal circumstances.
Leave a Reply