Is it better to be in an Umbrella Company than a Limited Company

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Better Limited Company or Umbrella Company
Better Limited Company or Umbrella Company

Better Position

This article, about whether it is better to be in an umbrella company or limited company, was posted as comments after one of our articles. See what you think.

Advice to Contractors

After being a contractor for a long time I can offer the following advice to my fellow contractors:

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1: Unless your earning in excess of £75-80K+ PA it‘s a complete waste of time/money to even have a ltd company as the savings are not all that & in return you get a lot of hassle from HMRC perhaps up to 12 months after the contract expired they will still ask you for returns.

2: Just pay someone to manage the contract for you via a managed umbrella where your considered the employee of that umbrella company so you end up paying more tax+NI (around 15%) but in return you do not have to set aside a lot of your earnings or keep track of NI payments etc etc.

3: When the contract starts no-one will tell you between contracts it costs the same to keep a ltd company running. Accountants will ask for £65-80 per month just to file a few forms to companies house on your behalf!

4: Sure, you say, I will close the company then & start another when I get my next contract. Be prepared to pay around £230-250 to your accountant to wind the ltd company down & it can take up to 14 months to do so, plus lots of forms & HMRC most likely chasing you for money you do not even owe them!

Forget about IR35 it should only really apply to contractors earning close to 6 figures or more (and yes there are plenty of those around!).

So, you can judge for yourself whether it is better to go the limited company route or the umbrella company route.

The choice is yours.

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