Advantages:
- Very easy to use, you simply enter your timesheet and expense details and wait to be paid.
- All tax and NI is deducted before you receive your money, so you will have no further taxes to pay.
- Ideal for short term contracts.
- Ideal for contracts less than £25k per year.
- Good if you are unsure if contracting is for you and you’re really just in between permanent jobs.
- Someone else will be doing all the paperwork.
Disadvantages:
- The most expensive way of working. You will receive a salary that is subject to full PAYE Tax and NI, it’s just like being a permanent member of staff again.
- You are reliant on the umbrella company to collect your money from the client or agent and then to pay it on to you.
Limited Company:
Advantages:
- The most tax efficient way of working.
- Claim a wider range of expenses
- Access to the Flat Rate VAT scheme.
- You keep complete control of your financial affairs meaning you do not have to risk your money with any third party administrator.
- Running your own business isn’t difficult; submit spreadsheets to your accountant – just like umbrella time-sheets and expenses.
- Greater opportunity for tax planning than Umbrella Company
Disadvantages:
- There is a certain amount of paperwork involved, usually about 10 – 15 minutes per month.
- Can be costly if you contract for a very short period of time, then go back to permanent employment.
- Not ideal for contracts less than £25k per year.
