Form a Limited Company
The three main things you will need to do are: Form a Limited Company, open a business bank account and appoint an accountant, some contracts also insist on professional indemnity and professional liability insurance.
The real decision comes down to personal choice – yes you may take home more money, but you will spend more time managing and operating your company. A specialist firm of accountants like Dolan Accountancy, can help manage your tax affairs but there will inevitably be some administration you will need to complete each month.
A full review of the pros and cons of each method can be found below. If you would like more information about going limited we suggest downloading Dolan Accountancy’s guide to contracting through your own limited company.
If you have any question about contracting or would like any further advice, please either call Sophie on 01206 591 000 or e-mail sophie.lewis@contractorumbrella.com.
Limited or Umbrella?
| PAYE Umbrella Company |
Limited Company |
| Pros |
Pros |
| Very easy to use, you simply enter your timesheet and expense details and wait to be paid. |
The most tax efficient way of working. |
| All tax and NI is deducted before you receive your money, so you will have no further taxes to pay. |
You keep complete control of your financial affairs. |
| Ideal for short term contracts. |
Access to the Flat Rate VAT scheme. |
| Insurance policies included as part of the service. |
Running your own business isn’t difficult (it may be time consuming but it isn’t hard). |
| Most importantly someone else will be doing all the paperwork. |
Greater opportunity for tax planning than PAYE Umbrella. |
| Perfect if you are unsure if contracting is for you and you’re really just in between permanent jobs. |
|
| Cons |
Cons |
| Your salary will be subject to full PAYE Tax and NI. |
There is a certain amount of paperwork involved. |
| You are reliant on the umbrella company to collect your money from the client or agent and then to pay it to you. Contractor Umbrella will chase any overdue payments, on your behalf, free of charge. |
Can be costly if you contract for a very short period of time and than go back to permanent employment. You will be tied into a full 12 months of accountancy fees, regardless of contract length, and have to pay out for annual insurance policies. |
|
Not ideal for low earners. |
Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Our contractor accountancy package includes free:
- Company Formation
- Business Banking
- Access to FreeAgent
- Registered & Director’s Service Office Address
- Free use of Contractor Umbrella for those contacts that better suit umbrella employment.
Dolan Accountancy can be contacted on 01442 795 100 or email sophie.lewis@dolanaccountancy.com.
