Before you sign up with an umbrella company, check whether your contract is outside of IR35.  We can do that for you and, if it is outside of IR35, you could save literally thousands of pounds in tax.  Running a limited company is not the great hassle umbrella companies make out it to be and you will pay less tax.  The key differences between contracting under an umbrella company or through a limited company are as follows:

  • Tax efficiency?  Usually a Ltd company.
  • Take home rates?  Ltd co up to 80% plus (if outside IR35), Umbrella 65% plus
  • Why the difference?  Umbrella company’s almost maximise your tax liability so there is very little for the tax man to be unhappy about (HMRC do have an issue with some Umbrella’s expenses process).
  • National insurance contributions?  Nil if properly structured via a limited company and outside of IR35.  You pay 12% employee’s NIC’s AND 13.8% employer’s NIC’s if you work under an umbrella.
  • Hassle factor?  Umbrella’s often sell low hassle but various forum’s we have seen shows a lot of discontent with umbrellas.  Running a Ltd company takes 1/2 hour a month to run with a decent accountant.  We think there’s no hassle running a ltd company.
  • Expenses?  Your expenses are capped at 5% of contract value if you work for an Umbrella.  The limit doesn’t apply if you work through your own Ltd company and are outside of IR35.
  • Employee benefits and support?  Any cash benefits are paid for by you and you will rarely get any of the support a normal employer would offer.

Bottom Line:  Check if you are outside IR35 BEFORE signing up to an umbrella company.  You could save £’000’s in tax and national insurance.  Call us to see if your contract is outside of IR35.

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