One of the biggest decisions facing contractors today is whether to start a Limited Company or work through an Umbrella Payroll Company. If you are a contractor in the UK or considering living and working in the UK as an independent contractor, make sure you understand your options before making any decisions.
Setting up a Limited Company
Setting up and running a Limited Company, where you are a director and shareholder, while being a big responsibility comes with many tax benefits. You can, for instance, claim back on a wider range of expenses, including accountancy fees, travel costs and services and equipment needed by you to run your business.
Another advantage is the ability to register for the flat rate VAT scheme, which allows you keep some of the VAT you receive from your clients. You also have complete control over your finances.
Scott Brown from 1st Contact Accounting gives this advice:
“If you fall outside of IR35, setting up a Limited Company may be the best option for you. But be warned – it often involves an enormous amount of monthly and annual paperwork and requires that you are highly organised in admin matters!”
If this feels like the right option for you, be sure to partner with a reliable accounting firm from the onset, as this is the only way to ensure your accounting and tax matters are always under control. 1st Contact Accounting provide accounting services specifically for contractors and Limited Companies and can also assist you with the hassle-free setting up of your Limited Company. Go to www.1stcontact-accounting.co.uk for more information or for a free consultation.
The second option you have is to work through an Umbrella Payroll company. This is often the easiest option for Contractors, particularly for first timers and for contractors who might go back to permanent employment after a brief contracting period.
The main benefit of using an Umbrella Payroll system is the huge reduction in admin! An efficient Payroll company like 1st Contact Umbrella will have an online system with facilities that allow you to do everything from filling in timesheets to submitting your expenses.
With 1st Contact Umbrella, you can enjoy many of the benefits of being a permanent employee, with all the freedom of a contractor lifestyle” says Scott Brown. “There are also many advantages that people aren’t aware of, including the option to receive sick pay, leave pay and maternity pay – benefits normally reserved for those who are permanently employed.
Brown had this last bit of advice for contractors:
“The best thing to do is consult with an expert before you make your decision. Everyone’s circumstances are different and there are many factors to consider. A 1st Contact Accounting or Umbrella consultant will be able to analyse your situation and help you to make the very best decision for you.”