Limited Company VS Umbrella Company

Limited Company VS Umbrella Company…which is best for me?

As a leading contractor accountant that offers both a PAYE umbrella company and comprehensive limited company services, Nasa Consulting is well placed to help with the answer.

If you're just not sure which is best for you -we can discuss your individual requirements and give you impartial advice about which best suits your needs.

We've put this guide together to give you an outline of the main differences between setting up your own Limited Company against using PAYE umbrella company, Nasa Umbrella.

Whilst we hope this proves helpful it won't substitute a good old chat with one of our friendly consultants!

The following table provides a guide to the criteria that we use to work which suits you better - Limited Company or Umbrella Company.

	LIMITED COMPANY	UMBRELLA COMPANY
Is there a certain amount that I need to earn?	We recommend that only contractors earning approx £40k + per annum (~£150 per day) consider setting up a limited company.	As long as you earn over £8 per hour you may benefit from using the umbrella company.
Is there a minimum period I need to have a contract for?	While there are no minimum contract requirements, we suggest that you intend to contract for at least 6 months before going LTD.	None, although if you only intend to work one assignment through Nasa Umbrella you may not be able to claim expenses.
How much administration will I have to do?	A little bit of admin is required which may not suit the more admin averse! Completing bookkeeping forms, making payments, signing various documents and sending in expenses/receipts/bank statements each quarter. We would estimate no more than 1-2 hours per month.	Send us timesheets, expenses and any receipts that are required.
What are the costs?	Fee starts from £99 + vat per month payable by standing order from your business bank account.	Fixed weekly fee of £9.99 deducted at source from your gross salary.
Will IR35 apply to me?	IR35 will apply to you but with our assistance and IR35 services you can minimise your exposure by working in the correct way.	As an employee of Nasa Umbrella, IR35 won't apply.
How much of my earnings will I keep?	If you can work outside of IR35, then you can keep between 70-90% depending on your income and circumstances.	Depending on the level of expenses you incur, you can retain anywhere between 55-80% of your income.
Can I claim expenses to reduce my tax and NIC?	Yes, all business costs can be claimed for tax relief as long as valid receipts can be provided.	As long as you qualify, you can offset some costs against your tax and NIC.
Are there any other ways in which I can reduce my tax liability?	You can also save tax by making pension contributions, following certain drawing strategies and you may also benefit from VAT savings from using the flat rate VAT scheme.	By making pension contributions you can reduce your tax liability further.
Will I receive business insurance cover with the service?	As the limited company is your sole responsibility, you will need to arrange business insurances directly. Nasa can of course recommend reputable providers. All costs will be claimable as business expenses.	Business insurances are included as part of your weekly fee. Professional Indemnity insurance cover is available at a £1 per week subsidy.
Which bank account will I receive my money in?	You will need to open and manage a separate business bank account. Nasa can assist you with an HSBC account set up.	All payments are made directly into your named personal bank account.

As you can see from above there are many factors to consider before deciding which service to use.

As a rule - those contractors who are:

generally on higher pay rates
that expect to contract for the longer term
and genuinely wish to build their own business

then setting up a Limited Company is a better option. Those who don't wish for the added responsibility of being a business owner, only plan on doing short term assignments or are on under around £40k per annum tend to use the umbrella company.

Limited Company VS Umbrella Company

Limited Company VS Umbrella Company…which is best for me?

LIMITED COMPANY

UMBRELLA COMPANY

We recommend that only contractors earning approx £40k + per annum (~£150 per day) consider setting up a limited company.

As long as you earn over £8 per hour you may benefit from using the umbrella company.

While there are no minimum contract requirements, we suggest that you intend to contract for at least 6 months before going LTD.

None, although if you only intend to work one assignment through Nasa Umbrella you may not be able to claim expenses.

A little bit of admin is required which may not suit the more admin averse! Completing bookkeeping forms, making payments, signing various documents and sending in expenses/receipts/bank statements each quarter. We would estimate no more than 1-2 hours per month.

Send us timesheets, expenses and any receipts that are required.

Fee starts from £99 + vat per month payable by standing order from your business bank account.

Fixed weekly fee of £9.99 deducted at source from your gross salary.

IR35 will apply to you but with our assistance and IR35 services you can minimise your exposure by working in the correct way.

As an employee of Nasa Umbrella, IR35 won't apply.

If you can work outside of IR35, then you can keep between 70-90% depending on your income and circumstances.

Depending on the level of expenses you incur, you can retain anywhere between 55-80% of your income.

Yes, all business costs can be claimed for tax relief as long as valid receipts can be provided.

As long as you qualify, you can offset some costs against your tax and NIC.

You can also save tax by making pension contributions, following certain drawing strategies and you may also benefit from VAT savings from using the flat rate VAT scheme.

By making pension contributions you can reduce your tax liability further.

As the limited company is your sole responsibility, you will need to arrange business insurances directly. Nasa can of course recommend reputable providers. All costs will be claimable as business expenses.

Business insurances are included as part of your weekly fee. Professional Indemnity insurance cover is available at a £1 per week subsidy.

You will need to open and manage a separate business bank account. Nasa can assist you with an HSBC account set up.

All payments are made directly into your named personal bank account.

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LIMITED COMPANY VS UMBRELLA COMPANY

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