New to contracting?

Umbrella or limited company:
Which is right for you?


There are many great reasons to become a contractor, yet there is a lot of information to absorb. Let us help by providing all the relevant information gathered over years of experience.

5. Reconsider your setup - Already contracting

I’ve set up a limited company, can I switch to an umbrella?

As a contractor you have a relative freedom in terms of how you’re employed. You’re more than welcome to switch between employment vehicles, providing you’re not caught inside IR35 but there are major differences between the two options.

 

 

Read more about the differences of an umbrella company and limited company working option.

Are there any reasons why I can’t use a limited company for my contracting?

If you don’t work on a government contract then there are no reasons why you can’t operate and invoice out of your own limited company. The off-payroll rules came into force in 2017 that led to many government departments and agencies stopping contractors from using their own limited company. This has meant that umbrella companies have become the norm for those working on a government contract. It was announced in the 2018 Autumn Budget that the same rules will be enforced in the private sector in 2020. Due to the Covid-19 Pandemic, the introduction of these rules has been delayed until April 2021.

I understand that as a contractor I can claim expenses to offset tax?

Traditionally the ability to claim expenses can be offset against earnings and reduce taxable earnings. If you work through an umbrella company then the ability to do this will be governed by their policy. Most umbrellas no longer offer this facility as new rules that have been brought in make the directors of the umbrella liable if it is found that the worker was under supervision, direction and control whilst expenses were being processed. If you are working through your own company you can decide on the expense policy but be aware that you as a director will be liable should you not be able to prove that you were not under Supervision, Direction and Control.

Relevant Articles: New to Contracting

Preparing for IR35 - The Importance of MOO

Preparing for IR35: The Importance of MOO

| Already contracting, Considering contracting, IR35, New to contracting, News, Preparing for IR35 | No Comments

‘Mutuality of Obligation’ (MOO) is one of the three key tests used to determine IR35…

Choosing the Right Recruitment Agency

Choosing the Right Recruitment Agency

| Already contracting, Considering contracting, New to contracting, News | No Comments

Statistics have shown that 80% of contractors use agencies to help them find work. Choosing…

Which Sectors Are Hot for Contractors

Which Sectors Are Hot for Contractors?

| Already contracting, COVID-19, Engineering, Finance, IT, New to contracting | No Comments

As businesses feel their way foreword after the pandemic, many are turning to contingency staff…

Request a free
20 minute consultation

At ContractingWISE, we’ll ensure that you have genuine, objective and accountable information so that you can explore the options and make a wise choice.

ContractingWISE - Contact us