Contract Eye recently wrote an article about the advantages of disadvantages for contractors, of working though your own limited company or via an umbrella company.
A large proportion of contractors work via their own limited company, or via an umbrella company and they wanted to help contractors when they are deciding which option to use.
Many contractors contract via limited companies and Contract Eye say this is often the most tax efficient way to work, especially if you are not caught by IR35.
They add, “Limited company contractors typically take a small salary (minimising PAYE and NIC liabilities), and withdraw the remainder of their income in the form of dividends.”
Working through an umbrella company, however, is often viewed as hassle free, especially if you are only contracting for a short period or if you are caught within the IR35 legislation. According to Contract Eye, service providers such as ICS, take care of invoicing, administration, chasing payments, and processing an individual’s payroll, leaving them to concentrate on their work duties.
They said, “If you are unsure if contracting is the life for you, working via an umbrella company offers a low-risk way of trying things out.”
There are advantages and disadvantages to working through your own limited company or via an umbrella company and it is important for a contractor to assess these and decide which the best option for them is.
Independent Contractor Services (ICS) offer both a Limited Company Service and an Umbrella Service, and can talk you through your options. Use our contractor calculator to find out what your return could be and which service may be best for you.
