Employment Status

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...]

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Alternatives to an Umbrella Company

The Reason

HR law means your client has a recruitment policy dictating certain skills/functions will only be sourced to a limited company. Your contract assignment falls within this remit.

That's why you need limited company 'status' of some sort. It's got nothing to do with expenses or HMRC or anything else. It's because a contingent workforce is what drives developed economies.

Agency PAYE

In this instance, you become an employee of your recruitment agency, and the recruitment agency would become your 'limited company' for the purposes of the contract.

Financialy, this option is the worst for you. Your net take home pay will be the lowest of any of your options. Not a long-term bet.

Referred to as 'going agency PAYE', may be preferable if your contract is just for a day or two.

However, you might not get this option. For many recruitment agencies the cost and administration burden this involves means it's usually just not worth their while to provide such a service.

Running your own Limited Company

Setting up and running your own one-man limited company means you become liable and responsible for the correct administration of the business - in addition to fulfilling your contract on a daily basis.

You will be a director, with obligations and responsibilities for the legal compliance of the limited company. There are many detailed and intricate laws to understand across a wide range of disciplines.

Appointing an accountant is necessary and this and other costs must be taken into account.


The only way a contractor can comply with the client's recruitment policy, and look after themselves, is to set up their own one-man limited company or to use an umbrella company service

Are you ready to go umbrella? Use our umbrella company comparison calculator and compare prices, reviews and view a personal take home pay example.

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HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.