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Spotlight on contracting: Umbrella vs Limited Company

When moving into contracting there are plenty of questions you have to ask yourself. In our ‘Spotlight on contracting’ blog series we aim to answer these questions for you.

In our first blog we took a look at the different ways contractors can get paid, whether this be directly, through your own limited company or via a third-party umbrella company.

In this blog, we want to take a look at the differences between a limited company and an umbrella company.

IR35

Before making any decision on whether you want to contract through an umbrella company or as a limited company you need to find out if your contract will fall under the new IR35 regulations that come into force in April 2020.

If your contract does fall under the IR35 regulation, you must be paid under an umbrella company.

 

What is a Limited Company?

By setting up a limited company you effectively become the director of your own company. Having a limited company allows you to have full control of your revenue and is typically the more tax efficient option. You submit your own timesheets, invoices and VAT returns.

What is an umbrella Company?

An umbrella company will act as your legal employer. You will submit your timesheets, but the umbrella company will take care of any other paperwork, including invoices, tax, national insurance and VAT. Umbrella companies allow you to offset any business expenses against taxable pay (if the role is outside of HMRC’s direction, supervision and control guidelines).

The Pros and Cons

Limited Company vs Umbrella Company

Take a look at these contractor calculators to help you work out the different benefits according to your circumstances.

Working with a recruitment agency

Here at KDR, we pride ourselves on our contractor care. Whether you are contracting via your own limited company or umbrella company we aim to make the process as smooth as possible.

If you are new to contracting and have any questions our team are here to help.

“Georgia was able to help me secure my first BI contracting role after 14 years as a perm. She has helped me to take the first few steps into contracting and was on hand to answer any questions I had.” – Senior BI Developer

Moving into the data, technology and analytics contracting world can be daunting. Hopefully, we have helped you to understand the differences between a limited companies and umbrella companies. Before making any decision, it is always best to do your research.

If you do have any further questions about contracting, you can contact Declan or check out our latest roles here.

Missed the first blog in our series? Check it out below:

Spotlight on contracting: How do I get paid?

KDR Recruitment is the home of the best data, technology and analytics jobs. For more career advice check out the KDR blog or follow KDR on LinkedIn.

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