As a contractor, there are a number of ways in which you can operate, but two key choices are: through your own limited company or under a PAYE umbrella. Both options offer a number of pros and cons depending on your experience, the length of time you intend on contracting and the level of time you have to dedicate to paperwork.
To better help you understand your options and which route is best for you, we’ve put together our handy downloadable guide and video.
What’s inside the guide?
- Umbrella & Limited – the differences between the two structures.
- Advantages & disadvantages – which route is best for you?
- Rates of take-home pay – how much could you earn?
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Forming your own limited company
Contracting under your own limited company means that you will be in charge of your accounts, your salary and your taxes. You will need to establish your limited company and open your business bank account.
As the limited company director, you will control invoicing, the company bank account and decide on how much to pay yourself, which is made up of a combination of salary and dividends.
Contracting through PAYE Umbrella
Working under an umbrella company, on the other hand, means that this will be the responsibility of your umbrella company who will act as your employer.
You submit your timesheet to your umbrella company who will then pay you a salary with National Insurance and tax already deducted.
What benefits do I get from setting up a limited company?
Both structures come with their own perks dependant on your circumstances. However, becoming a limited company director does give you the following:
- Complete control - you maintain complete control over your financial affairs.
- A wider range of expenses - being a limited company director means you have greater access to expenses which can be claimed back.
- Personal accountant - by working with a dedicated personal accountant, you can maximise your take-home pay.
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