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Pros & Cons of Limited vs Umbrella companies

Now you've made the decision to begin work as a contractor you're faced with another choice: to work for an Umbrella company or a Limited company? 

While both have their distinct advantages and disadvantages, it's ultimately up to your individual needs as a contractor that determines where you land. Here's a look at the pros and cons of both options.


Limited Companies

Advantages
  • You are in control of your finances, as revenue is paid directly to the company bank account
  • It is the most tax-efficient way to work as a contractor
  • You have control over the running of the company 
  • You aren't reliant on other people for admin work and finance
  • It is easier to work for more than one client at once
  • No monthly fee to an umbrella company

Disadvantages 
  • A considerable amount of work is involved in the upkeep of the company and administration
  • You have to open a separate business account for your company (which may charge a fee to operate and maintain) 
  • Annual tax returns need to be completed by directors 


Umbrella Companies

Advantages
  • All admin work is taken care of by the Umbrella company 
  • You save the time and hassle associated with setting up and running a company
  • You don't have to set up a separate account for the money you earn 
  • Timesheets are submitted to the umbrella company, rather than chasing the agency

Disadvantages
  • You have less, if any control over the running of the company 
  • You are taxed with PAYE (pay as you earn) which is less tax-efficient
  • There is no room to expand or change to full time work
  • You receive your pay through the umbrella company rather than directly

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