Maximize Your Earnings with Pick The Umbrella

A limited company is a separate legal entity through which you conduct your business as director and shareholder. Since it’s a separate legal entity to yourself, the company has its own bank account and assets. Contracts are between your business and your client, and any profits and losses belong to the company.
The name Limited company stems from the concept of limited liability – meaning that the owner of the company cannot be held personally liable for any losses or debts incurred by the business. In the event that things go wrong, creditors can make claims on the assets of the business, but your own personal assets are protected.
There is a small fee associated with setting up a Limited company and registering it at Companies House, as well as several reporting requirements. Accounts must be submitted annually, alongside other administrative documents. There are also deadlines for paying Corporation Tax, currently charged at 20% of the company’s profits after all expenses are taken into account. 

An Umbrella company acts as an employer for contractors on temporary contracts, typically working through a recruitment agency. It serves as a single employer throughout multiple contracts – contracts are between your clients and the Umbrella company, which pays you as an employee through the PAYE system.
As contractors sign a full contract of employment with an Umbrella company, they’re entitled to the full statutory benefits of employment – Statutory Maternity and Paternity Pay (SMP/SPP), Statutory Sick Pay (SSP), a pension scheme and holiday pay. Many Umbrella companies also offer additional employment benefits not required by law, such as insurance, private medical cover, access to counselling and welfare services, and reward & benefits packages.
Since Umbrella company employees are paid through the PAYE system, there are no additional reporting requirements – just like a permanent employee, all tax is deducted at source and declared to HMRC each time you’re paid.

 …you’re probably better off being paid through an Umbrella company.
Being paid through an Umbrella company is the lowest-admin option – the Umbrella company will invoice your client for your work on an agreed timescale (usually weekly), and process your payment through the PAYE system, accounting for tax and National Insurance. They may also take a margin each time you’re paid. You may need to submit a weekly timesheet, but that’s the extent of the work you’ll have to put in to be paid.
Umbrella companies are also suitable if you’re working on a short-term contract, or unsure if you’ll continue contracting long-term. Unlike a Limited company, which needs to be closed down if it’s no longer needed, you can simply end your employment with an Umbrella company if you no longer require their services. As with the end of all employment relationships, you’ll be issued with a P45 which you can take to your next employer.