Limited Company vs. Umbrella

The simple truth is that our umbrella can be very useful for people on a lower income. Contractors normally below about £13.50 per hour. This type of contractor benefits, as they can find legitimate business expenses to claim to minimise their tax. The problem comes when you need to find large amounts of expenses to cover the bonus that leaves you paying both parts of the National insurance making you worse of then if you were on PAYE.

Limited companies benefit contractor:-

  • 1. Pay less PAYE and NIC than using an umbrella due to a set salary. (if you are outside IR35)
  • 2. Allows for additional people on the company payroll scheme. This helps minimise the company's profit
  • 3. Dividend on the company's profits is at 10% below the upper rate of tax and do not attach NIC
  • 4. The money from the agency goes straight into the company's bank account which allows you to have complete control over the finance. If an umbrella company goes out of business and does not pay you; then there is little chance of recovering the money you are owed.
  • 5. You can tax plan to spread your earning throughout the year, which means you can maximise the use of the company's expenses .
  • 6. You can benefit from using the flat rate VAT which could net the company between £1,500 to £2,000 a year in additional income (it will pay for your accountancy fees)
  • 7. You do not need to worry about whether the umbrella company is paying your PAYE and VAT
  • 8. You can leave the money in the company and not pay any personal tax liability

The truth with regards to getting started with a limited company

  • 1) A limited company can be set up within 4 hours
  • 2) A limited company bank account can be set up in 1 day
  • 3) A company can start to trade before it receives its VAT number
  • 4) A PAYE scheme can be set up within 3 weeks

We can get you ready to trade within 24 hours

There is no need to use an umbrella company to start with. If your rate is more than £13.50 and you work more than 30 hours a week, you would be much worse off using an umbrella, even if it is only for a 6 month contract.

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