Most contractors choose to work in either one of two ways, through a limited company or under an umbrella company. In the following paragraphs we’ll breakdown everything you need to know about umbrella companies and whether or not they are the best option for you.
In a nutshell, contractors are employed directly by the umbrella company. You’ll still get all the benefits of being your own boss, like being able to choose what hours you work, but instead the umbrella company handles invoicing on your behalf and pays you as a PAYE employee.
The advantage of this route is that the paperwork is minimal and you don’t have to submit a tax return as all tax is deducted for you. All you need to do is submit a timesheet to the umbrella company will invoice the client and pay you once they have received the funds.
Whilst umbrella companies provide contractors with far less administrative duties, when working under an umbrella company you can typically expect to take home around 60% to 65% of your gross income. In contrast, contractors who choose to work through a limited company can take home 75% to 80% of their gross earnings.
With these figures in mind, it is no surprise that thousands of contractors choose to go down the limited company route. The greater take home pay amounts more than outweigh the extra time that is need to focus on administrative duties. Moreover, if you struggle when it comes to keeping on top of paperwork, a good accountant will be able to help and take care of as much or as little of your accountancy needs as you require.
In addition to the higher take home pay amounts; there are a number of other key advantages to choosing to operate through a limited company.
At Contractor Accountants Online our team of qualified accountants have the knowledge and experience to manage all of your accountancy needs.
We have a wealth of experience in helping contractors just like you get to grips with the complex world of tax and accountancy. Our comprehensive, fixed-fee package is just £55 per month and we’ll get your limited company incorporated within 24 hours.
Unlike many other contractor accountants, we offer a fully transparent service with no hidden extras, for just £55 per month you will receive:
If you have any questions about our service, call our expert accountants on 020 7481 4743 and we will be happy to help.
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