Back to Top
  • ALL-in-ONE

    Proactive Planning Partner



    Financial Director+ at Senior Bookkeeper rates!

    Cost Saving Outsource Specialists

Limited Company vs Umbrella

A LIMITED Company may be the most tax-efficient method to use. Contractors who operate via out their own organization can save significant values on taxes and National Insurance contributions (NIC), in comparison to operating as a direct employee or through one of the Umbrella’s. However, the quantity of taxes and NIC preserved depends upon the known degree of income the business receives, and the way the revenue are paid for you, the contractor. Obtaining professional advice from a contractor accountant shall make sure you reap the taxes advantages from the outset

As a limited Company, you pay yourself a simple income and certain tax-free expenditures as cash, and possibly even consider including a contribution to a registered pension scheme held in your name.

LTD’s must pay company taxes, plus VAT and NIC on your own income (within limits). Any money that remains undistributed represents profit which could later be paid as a dividend depending on the year end position, or still left within the Small Company until you wish to extract it or close straight down the ongoing firm – especially if the Corporate tax rate favors creating retained earnings.

The flexibility more than when to take income out from the ongoing company provides further tax prep benefits.

You can choose just how much to take as an income, and therefore how much cash will be left to spend by means of dividends. The combination of dividends and income affects just how much tax you can pay, as dividends are taxed at lower prices than salaries (observe below).

It's worth being aware that a lot of the administration and paperwork that comes from running a Limited Company can easily be analysed by a qualified Tax accountant, which will reduce the threat of any penalties greatly. Your accountant may also be able to offer you assistance and guidance on how to manage your own IR35 status for ongoing or new agreements. They can help you on whether trading as a limited Company is ideal for you personally and setup your very own firm in the most tax-efficient way & more importantly – cash flow maximising way.