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How easy is it to switch from an Umbrella Company to a Limited Company?

Published on Friday, January 22, 2016

Written by Alex Cadman

Recent changes to legislation have led many contractors to ask: how easy is it to leave my umbrella company? Leaving an umbrella company is a quick and easy process, and many contractors are switching to the more tax efficient limited company model. We explain how to make this happen.


What is the benefit of switching to a limited company?
As we mentioned in a previous blog "leaving umbrella company,"if you work via an umbrella company you will see a significant drop in your take home pay from April 2016 when HM Revenue & Customs abolishes Travel and Subsistence as a claimable expense.

For many, the additional administration associated with operating a limited company meant that working through an umbrella company was their preferred option. However, from April 2016, the difference in take home pay between the two models will be substantial, making the extra administration worthwhile.

The following table compares your weekly take home pay through a limited company versus an umbrella company, taking into consideration the removal of Travel & Subsistence claims through umbrella companies on 6th April, 2016.

Weekly Income


Umbrella Take Home Pay
(after April 2016)


Limited Take Home Pay
*Outside IR35

£750

£495 (66%)

£635 (85%)

£1,000

£649 (65%)

£843 (84%)

£1,250

£790 (63%)

£1,051 (84%)

£1,500

£917 (61%)

£1,258 (84%)

£2,000

£1,172 (59%)

£1,673 (84%)

You can request your own tailored take home pay calculation for a limited company using our contractor take home pay calculator.

If you are ready for a drastic increase in your take home pay by making the move from working through an umbrella company to operating your own limited company, there are just a couple of simple steps to follow:

Leave your umbrella company
Simply inform your umbrella company that you no longer require their services. In some cases, you need to provide a notice period, but not always. You might receive a P45 form from your umbrella company; if you do have one, you can pass this to your contractor accountant. It is not essential though, and if you do not have one you can still proceed with setting up a limited company.

Set up your limited companySet up your limited company
This step is quick and easy with the help of a specialist contractor accountant. An expert such as Churchill Knight & Associates Ltd can assist you by setting up your new limited company through Companies House, and register it for VAT, PAYE, Corporation Tax, and National Insurance. We can also help you open your business bank account so you do not have to worry about any frustrating set up procedures.

After setting up your limited company
Once you’re set up with your limited company, all you have to do is submit your timesheets and expenses through our straightforward Client Web Portal, and we’ll take care of all of the invoicing, payroll, bookkeeping and accounts management on your behalf.

This way, you can focus on what you do best, and you will enjoy a higher take home pay than when working through an umbrella company.
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“I have used Churchill Knight since I started my own company, and can only give praise: the guidance I got when setting up the company, even down to how to fill in the bank forms, was superb - and since then every query I've had has been dealt with swiftly and accurately… running my own company is just as simple as using an umbrella company.”

- K Mountain, Infinitely IT Ltd
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There's no need to be tied in
Leaving your umbrella company to set up your own limited company is fast and can be hassle-free with the assistance of a good specialist contractor accountant.

The transition from umbrella to limited is seamless with an all-inclusive service, such as the service offered by Churchill Knight. If you would like a more in depth explanation on how to start the process of switching from umbrella to limited, call us at 01707 871622 or use the button below to find out more about our services. Alternatively, click the Take Home Pay Calculator button to receive a personalised calculation.

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