Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
If you are a new contractor, the chances are that you are currently scrambling around trying to find an umbrella company and information about what an umbrella company is. RELAX. Umbrella compare has all the information you need to make an informed decision and select the appropriate payroll solution for you and your contract.
This is the key question you need to consider, Umbrella Compare has detailed limited company guides and umbrella company guides which you should take the time to review as part of your own due diligence procedure. It's your money, make it work for you. The illustration below provides the comparative merits of both umbrella and limited solution. At the bottom of each is a link to a comparison calculator where you can compare the UK's leading companies and access a personal salary illustration.
So, no need to worry, you have come to the right place. Grab a coffee, relax and set yourself a good 15 - 30 minutes aside to review the contractor guides and make a decision... A good Decision... made once.
|Limited Company||Umbrella Company|
|Expect to pay around 20% of your income in tax. Tax rates reduce as operational costs are deducted reducing tax rates to 0% dependant on turnover and expenditure.||Tax||Expect to pay around 40% of your income in tax initially. Tax rates then reduce to as little as 10% (90% take home pay) as legitimate expenses are deducted.|
|You will need to arrange sufficient insurance and cover yourself. Some accounting and contractor limited company specialist include insurances.||Insurance||Umbrella companies include insurances within their fees: Employers liability, public liability and professional indemnity insurance(s).|
|£2-3k per annum dependant on industry. Use a dedicated contractor accountant solution to reduce monthly costs / access discounted services.||Costs||Single monthly or weekly fee covers all payroll, tax, accounting and insurance requirements.|
|Business running costs and expenses associated with your business can be deducted from your business income, your accountant will guide and advise you.||Expenses||Claim your contract related expenses (typically using an online system), umbrella company vets / approves and deducts from tax increasing your take home pay.|
|You are the director of your company, you have full control and accountability for your company.||Status||You are an employee of the umbrella company.|
|Funds are transferred into your business bank account. You decide on salary / bonuses and are responsible for Tax, PAYE, insurance and accounting costs.||Pay||The umbrella company receives payment from the agency, deducts all associated tax, costs and pays the remainder into your account.|
|Limited Company is best option for career contractors. Specialist accountants can assist with company formation and on-going tax/financial compliance||Duration||Umbrella Companies are perfect for one off contracts and for those who don't want the hassle / legislative obligations.|
|If you use a specialist accounting solution for contractors: Full accounting and payroll management, dedicated account manager, assistance and guidance with insurance and business banking.||Service||Umbrella Company service typically includes all accounting function, payroll management, online portal for real time expenses, dedicated account manager, Holiday pay, Sick pay, insurances and tertiary legislative requirements to work.|
|Request a Limited Company quote / callback||Quote||Request an Umbrella Company quote / callback.|
Choosing an umbrella company shouldn't be difficult, there's plenty of competition so getting a good deal is easy, right?
Sadly not. There are still far too many rogue umbrella companies knocking around the market, that's where we come in. Umbrella Compare has a strict vetting procedure which covers accounting, background, insurance and compliance checks. View the UK's Top 10 Umbrella Companies
Agencies refer contractors to us because our vetting means their contractors are protected. Choose a complaint umbrella company like Go Umbrella, Contractors Umbrella Company or view our top 10 umbrella companies.