close menu

Payroll vs. Limited Company? Which is the better option for you?

by 1st Contact | May 03, 2011
  • 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.
  • Accounting

    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.

    Umbrella Payroll

    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.”

    Contact a consultant on our website or or call 0800 856 2477

    • london-bus-ben
      Applying for your NI number: Don’t go it alone
      Jun 12, 2018  |  by Leanne Shrosbree
    • london-thames-big-ben
      10 reasons why London is still our favourite city
      May 04, 2018  |  by Leanne Shrosbree
    • man-working-at-home
      Get the most out of being a contractor in the UK by following these simple steps
      Mar 15, 2018  |  by 1st Contact
    • tax-hand-magnifying-glass
      Reap the benefits of submitting your Self Assessment tax return early
      Mar 02, 2018  |  by Kobus Van den Bergh
    • students-graduating
      UK student visas: Here's how you can get one
      Feb 22, 2018  |  by John Dunn
    • students-school-chalk-board
      Get your child into state-funded school in the UK
      Feb 21, 2018  |  by Leanne Shrosbree
    • medical-cross-and-heart
      The NHS vs Medicare: Which is better?
      Jan 30, 2018  |  by 1st Contact
    • big-ben-london-at-night
      What is the cost of living in London in 2018?
      Jan 25, 2018  |  by 1st Contact
    • house-key
      To rent in the UK, you absolutely need to have the right to rent
      Jan 19, 2018  |  by Leanne Shrosbree
    • man-making-more-money
      This is how contractors can take home more cash
      Jan 09, 2018  |  by Kobus Van den Bergh

    Do you like cookies? We do, read why.