You’ve made the decision to start contracting and have secured your first assignment, what options are available to you now? The more traditional choices would have you asking, do I set up my own limited company or join an Umbrella Company? With no experience in the contracting world, this can be a difficult decision. In this article we will explain the differences between the two options, to assist you in making the right choice.
Before making a final decision it’s always advisable to look to the future rather than focus on the present. In April 2021 HMRC is introducing IR35 status for the private sector, meaning your end client will be liable and responsible for deciding whether the role could be carried out by a regular employee of the company. If this is the case, it will not be possible to fulfill your duties under your limited company. If you operate inside IR35 you will be taxed as an employee and subject to PAYE and National Insurance; if your contracts will consistently fall within IR35, the best option is to operate under an umbrella company.
To remove the ambiguity choosing an umbrella company may be the smarter move. Due to the fully employed status, you’re instantly removed from the scrutiny of IR35. You also have the reassurance that your funds are handled safely and securely on your behalf.
Pros of using an umbrella company:
Minor disadvantages of using an umbrella company:
Advantages of a limited company:
Are you still unsure about the best route to take? Our friendly customer service team are available to offer support and information. You can also visit our website www.umbrellacontracts.com and request an illustration, giving you the breakdown of your salary.