Reply to: Umbrella or limited company

[IR35 Avoider]

Cheaper to run or more efficient?

Cheaper. Not sure if there's a definition of efficient (other than accounting costs) where they differed significantly.

Another drawback of umbrella's is that they won't (or wouldn't when I looked) pay into my choice of pension scheme. Pension contributions were particularly important to me when I was treating myself as IR35-caught.

I may not be remembering correctly, but I think there may have been further pension inflexibility in that if I did pay into their inferior pension scheme, they wouldn't let me specify the exact amounts I wanted to pay, I think they only allowed you to specify percentage of invoice, which has never been the way I wanted to determine my pension contributions. For example, for a few years I split my income as minimum salary then, once invoices for the tax year surpassed that total, everything subsequent into the pension. I don't think the umbrella would have let me do that.

[northernladuk]

When I last considered this, several years ago, it turned out that it was cheaper to run your own company than use an umbrella.

That appears to still be the case. Crunch Accounting are charging me £77.40 a month for my company, the second umbrella I looked at appears to charge £108.50. (The first I looked at is one of the oldest and most well-known, yet I was unable to find explicit mention on their web-site of what exactly their fees were...)

It remains a mystery to me why it is cheaper to run a company than operate via an umbrella.

Apart from fees, if you ever work irregular hours/days per pay-period, and are IR35-caught, your National Insurance may be lower as a company director because you will have an annual pay period. To take an extreme example, if you work one week in the year and earn £5000, you may pay NI on that £5000 at a rate appropriate to someone who earns about 250K year, while a company director would pay no NI. (I may not have the details right, but you get the general idea: whether you have a weekly, monthly or annual period for calculting NI can affect your NI bill. Annual is best.)

Cheaper to run or more efficient?

[IR35 Avoider]

When I last considered this, several years ago, it turned out that it was cheaper to run your own company than use an umbrella.

That appears to still be the case. Crunch Accounting are charging me £77.40 a month for my company, the second umbrella I looked at appears to charge £108.50. (The first I looked at is one of the oldest and most well-known, yet I was unable to find explicit mention on their web-site of what exactly their fees were...)

It remains a mystery to me why it is cheaper to run a company than operate via an umbrella.

Apart from fees, if you ever work irregular hours/days per pay-period, and are IR35-caught, your National Insurance may be lower as a company director because you will have an annual pay period. To take an extreme example, if you work one week in the year and earn £5000, via an umbrella you may pay NI on that £5000 at a rate appropriate to someone who earns about 250K year, while a company director would pay no NI. (I may not have the details right, but you get the general idea: whether you have a weekly, monthly or annual period for calculting NI can affect your NI bill. Annual is best.)

[Neil@Intouch]

sorry to hijack the thread.....

I am on the same position.....working as IT perm on £44K, being offered a contract of £300/day.....

From research it looks like the best option is to go "limited company".....Researching now on reliable/cost effective account or whether DIY is viable.....

Yes I would agreee that a Ltd Company would be the best option. Is this a public or private sector job that has been offered?

If public sector then the option of an Umbrella company could work for you, to avoid the burden of the additional admin work.

Looking for an Accountant that specialises in contractors and has an Umbrella solution that you can switch between would be a really good option to give you ease and flexibility of your future contracts.

[rb51]

sorry to hijack the thread.....

I am on the same position.....working as IT perm on £44K, being offered a contract of £300/day.....

From research it looks like the best option is to go "limited company".....Researching now on reliable/cost effective account or whether DIY is viable.....

[Dan@OrangeGenie]

I am currently using an umbrella scheme for my contract through a non public sector employer.

Is it still worth switching to a limited company with all the IR35 changes happening?

A few factors to consider

Are you looking to contract long term?
Whats your day rate?
Length of contract?
Current tax position?
Are you well organised and happy to run a company?
Will you be staying in the Private Sector?

[Neil@Intouch]

Yes, I was.

In this case it would be the highest fee earner's activity that would be principle. In the case this is 50/50, which would be highly unlikely, then either activity would be fine. HMRC would want you to pick the higher flat rate VAT category, but wouldn't necessarily be wrong or right if this is 50/50.

[LondonManc]

Not necessarily, I assume you are referring to if they then decide to register on the flat rate VAT scheme, what category they would choose?

Yes, I was.

[Neil@Intouch]

Wouldn't that be dependent upon both her and her husband being in the same line of work?

Not necessarily, I assume you are referring to if they then decide to register on the flat rate VAT scheme, what category they would choose?

[LondonManc]

Both of your income can go through the same Ltd Company. You would just arrange for your contract to be in your Husbands company name and look at altering the share structure considering the income generated.

As your both fee earners then an alphabet share structure would benefit providing IR35 isn't an issue with your contract.

Neil,

Wouldn't that be dependent upon both her and her husband being in the same line of work?

[stuart pearson]

If you're working in the private sector and earn around £120 per day and more then it'll be beneficial to go Ltd.

If you're looking for a quick fix then go Umbrella.

[Neil@Intouch]

Hi all,

I am in the same dilema. I am new to working as a contractor. I won this contract through a recruitment agency and one of thier accountant has advised me to either use umbrella or let them create my ltd company. However, i would like to get paid asap on a weekly basis. I informed her that my husband works as a self employed . He has got two companies- a sole properitor and another one is VAT registered. Now my question is whether i can use his company? How does it work and is it legal?

Both of your income can go through the same Ltd Company. You would just arrange for your contract to be in your Husbands company name and look at altering the share structure considering the income generated.

As your both fee earners then an alphabet share structure would benefit providing IR35 isn't an issue with your contract.

[Haf2016]

Hi all,

I am in the same dilema. I am new to working as a contractor. I won this contract through a recruitment agency and one of thier accountant has advised me to either use umbrella or let them create my ltd company. However, i would like to get paid asap on a weekly basis. I informed her that my husband works as a self employed . He has got two companies- a sole properitor and another one is VAT registered. Now my question is whether i can use his company? How does it work and is it legal?

[SlipTheJab]

You are inside IR35... Stay umbrella

Ouch!

[northernladuk]

I am currently using an umbrella scheme for my contract through a non public sector employer.

Is it still worth switching to a limited company with all the IR35 changes happening?

You are inside IR35... Stay umbrella