Umbrella v Limited Company
Quick Guide
Umbrella Company
- You become an "employee" of the umbrella company
- You submit time sheets to the umbrella company which then invoices the end client/agency
- You are then paid as a PAYE employee less the umbrella fee
- You are allowed to claim some basic expenses
NOTE: Some providers claim to have "expenses policies" approved by HMRC which allow you to claim expenses without receipts.
HMRC do not "approve" policies in advance. They have made it clear that they will challenge any company actively encouraging tax avoidance through fraudulent expense claims.
Ltd Company
- Form a Ltd Company and open a business bank account
- The Director manages company invoicing, bank account and decides what to pay themselves via salary and dividend
- The Ltd Co’s contract can be with the end client or the agency
- The company can claim for legitimate business expenses e.g. travel & subsistence, telephone calls, subscriptions, accountancy fees etc
| Limited Company | PAYE Umbrella |
|---|---|
| FOR | FOR |
| This is usually the most tax efficient way of working | Simple to use – just submit your timesheet and expenses |
| You can claim a wider range of expenses | No need to worry about paying your tax yourself – all tax is deducted before you get paid |
| You keep full control of your finances | Works best for short term contracts for less than £35k/year |
| You have access to the flat rate VAT scheme | No paperwork |
| You have more options for tax planning |
If you would like further advice on umbrella services or setting up a Limited Company please call Kerry Pickersgill on 0161 968 8100 or email
Client introductions: we offer £75 for a new Limited Company and £50 for a new Umbrella
Reilly McMordie specialise in providing accountancy services for contractors throughout the UK. Established in 1985, we have extensive experience in the industry.
Next Step:
Please contact us if you need further advice, have any questions about our services, would like a free consultation or a fixed fee quote.
