Umbrella Company vs Your Own Limited Company
As a firm that provide all solutions under one roof, we can provide you with the best advice tailored to your individual needs
Before you decide, there are a number of factors related to your individual circumstances that you need to consider before making your choice. When you speak to one of our specialist consultants at Danbro we take into account various factors including;
- Length of contract
- Basis of pay
- Working practice
- Anticipation of future contracts
- Personal preference
Below we have outlined some of the pros and cons of working through a PAYE umbrella company compared to working through your own limited company. If you would like to speak to one of our consultants please call 0800 731 3178
| Limited Company | PAYE Umbrella |
|---|---|
| Advantages | |
| By setting up your own limited company, you will be running your own business. Providing you are not caught by IR35, this is the most tax efficient way of working. | By joining an umbrella company, you effectively become a PAYE employee. You still have some of the benefits that a limited company could offer i.e. claiming business related expenses. |
| You have extra flexibility when claiming business related expenses (training, equipment, software etc). | As an employee of the umbrella company all of your tax and NI is administered for you. The umbrella company will handle your invoicing, deductions and payments. |
| You can remain in the driving seat, allowing you to take complete control of your financial affairs and take advantage of your accountant's tax saving advice. |
You only pay for the service when the umbrella company processes your payments. |
| The finances of a limited company will be separate from your own personal finances. This means that you are not personally responsible for any company debts, except in exceptional circumstances. | No initial setup of a limited company required. You simply register to use the umbrella company. |
|
As a client of Danbro, nearly all the work and certainly all the worry of running a limited company |
|
| As a limited company with a trading name you can appear more credible when applying for new assignments. |
|
| Disadvantages | |
|
As a Director of your company, you will become ultimately responsible for ensuring it is run compliantly. NB: By appointing Danbro as your accountant we provide all the support and advice you need to ensure you fulfil you responsibilities. |
You will be deemed an employee of the umbrella company which requires you to receive a salary subject to PAYE tax and National Insurance. When working through your own limited company you can remunerate yourself using dividends which are not subject to PAYE tax and NIC's. |
|
There are various deadlines which you must meet (i.e. VAT returns, annual accounts etc), otherwise you could receive a penalty. NB: Your dedicated Client Manager would ensure you are fully aware of all deadlines. |
You are fully dependent on the umbrella company invoicing and processing your payments correctly and on time. |