web analytics
BOOK A FREE CONSULTATION

Is Starting a Limited Company the Best Move for Contractors and Freelancers?

Whether to continue as a contractor or sole-trader, go the umbrella route, or take the plunge and operate through your own limited company is a decision you should take with some care. This table may help you to decide: take a look at the options, go through the IR35 checklist to check your status, and then request a personal illustration to see which option best suits you. DNS can set up your limited company for you in a day and be there to help you all the way.

Options Suitability Advantages Disadvantages
Limited company
  • For those ready to take responsibility and who are not afraid of keeping records or working with figures.
  • For those who fall outside IR35: download the IR35 checklist to check your status.
  • For those who have Tax Investigation insurance and IR35 cover and who are not afraid of the risk "disguised employment legislation may pose.
   
  • A popular route that agencies are happy to work with.
  • Full control of your money.
  • Monthly return beats that earned through an umbrella company: can be 70–85% depending on your circumstances. Click here to request a personal illustration.
  • IR35 investigation can pose a threat, but with insurance you are protected. See how you can avoid the IR35 threat here.
  • Admin to be done on a monthly basis.
  • Tax paid in advance, so a responsible attitude is essential.
  • Tight cash control required so an organised and determined outlook is desirable.
  • IR35 investigation can pose a threat, but with insurance you are protected. See how you can avoid the IR35 threat here.
  • Admin to be done on a monthly basis.
  • Tax paid in advance, so a responsible attitude is essential.
Tight cash control required so an organised and determined outlook is desirable.
Options Suitability Advantages Disadvantages
Traditional umbrella company
  • Those without the desire to increase their earnings.
  • Those for whom there is no other option.
  • Those not interested in starting a company, whose agency may not accept other alternatives.
  • Easy to administer, less admin involved.
  • Popular with agencies.
  • Submit timesheets and receive wages.
  • Claim expenses to increase return (although collating expenses receipts take a fair amount of effort).
  • Return of 62–70% depending on your circumstances.
  • Disastrous in terms of tax planning!
  • Return is minimal.
  • Submission of expenses paperwork can be a real bind, worse than managing a limited company.
  • New disguised employment legislation (2014) may impact on contractors working through umbrella companies in the future.
  • Easy to administer, less admin involved.
  • Popular with agencies.
  • Submit timesheets and receive wages.
  • Claim expenses to increase return (although collating expenses receipts take a fair amount of effort).
Return of 62–70% depending on your circumstances
  • Disastrous in terms of tax planning!
  • Return is minimal.
  • Submission of expenses paperwork can be a real bind, worse than managing a limited company.
New disguised employment legislation (2014) may impact on contractors working through umbrella companies in the future.

Share this post