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So your recruitment agency, or a friend, have pointed you in either of two directions: working with an umbrella company or setting up a limited company. Either option provides its own benefits, but you’re here to hear about umbrellas.
In a nutshell, an umbrella company is a payroll provider for contractors, so they act as your employer, process you wages, and offer additional support such as administration. It means you can work between different contracts and they handle your admin and payroll, so your activities are focused on finishing and finding more work. So, that’s it.
There are plenty of reasons to set up shop with an umbrella company, and their ease of use when working is probably the main one. Here are a few of the main benefits you gain working under an umbrella company:
So, you’ve thought about making that important decision: choosing which umbrella is best for you. It can be a difficult task, we get it, mainly because you need to consider so much before making that big leap. However, it doesn’t need to be that difficult. You need to narrow down the factors that influence your choice, and then find umbrella companies based on your preferences.
So, here’s some key factors that might influence you, then go ahead and compare umbrellas here and get an immediate result. We only work with the UK’s leading compliant umbrellas, and 100s of them, so compare your options now.
There’s a reason setting up a limited company is such a popular option in the UK, because it’s a separate legal entity, which means its separate from its company directors, members and shareholders, so you liability is limited if the company were to face legal action, or other such issues. They can be set up in 24 hours, but you still need to manage your own payroll and administration, so that’s why many contractors use umbrella company services to manage both their payroll and administration, so they can get on with the job.
Establishing a limited company is a popular option for contractors because it provides tax advantages and gives you the freedom of being your own boss, so you can see why it’s so popular. As a shareholder, you draw your income from the company in dividends, and these are not deductible under National Insurance Contributions (NIC), however they are taxable, but the first £2000 is tax-free. If you like, you can divide your dividends with a spouse, which means you can both maximise your tax-free allowance.
As a contractor, you’re still subject to tax, so there are three tax models when working with umbrella companies, whether you’re working as an employee of that umbrella company or outsourcing your admin and payroll from your limited company.