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Limited Company vs Umbrella Company

To be a limited company or not?

Many umbrella payroll companies will tell you that your only choice as a contractor is to use an umbrella payroll company, but that isn’t strictly true.  So at MSL Forza we believe in giving you all the information you need to enable you to make an informed choice as to what suits your needs.  Yes, it would be in our interests to tell you that the only sensible thing to do is join our umbrella payroll company, but that isn’t what makes our service to contractors different and special.  While we could simply tell you here why you should use us and not even consider setting up your own company, it’s more honest to make sure you know exactly what’s involved, then the choice is truly yours.

This section is very important to you if you have complex financial affairs and have various other sources of income in addition to the income you receive from contracting.  If this is the case, you may indeed benefit from forming your own limited company as it could result in you actually increasing your net take home pay.  To determine whether or not this is the right course of action for you, we would advise you to contact an accountant and get expert advice.  You must nevertheless be fully aware that ,although you could benefit from extra money – and who wouldn’t  like extra money – you do need to consider what else it will cost you!  Running your own limited company means that you have all the responsibility of administering the business.  Here are some of the other factors you should also consider:

  • You will need to engage an accountant
  • You will need to register with Companies House as a director
  • You must keep Companies House up to date with your legal and tax status
  • You will have to produce detailed accounts
  • You will have to prepare and issue invoices and manage your own credit control
  • If your turnover is £70,000 or more then you will have to register for VAT, complete VAT returns each quarter and make payments to HMRC
  • You will have to complete a corporation tax return for submission to HMRC
  • You will have to calculate and pay your income tax and National Insurance contributions to HMRC
  • You must ensure that you do not make late payment of tax and National Insurance or file HMRC forms late as penalties will be incurred
  • Deal with all correspondence from HMRC, Companies House, DWP etc.
  • You will have to complete a self-assessment tax return every year

The above list is not exhaustive, even if it sounds exhausting, but it does give you some idea of what will be involved in running your own limited company.  After you’ve read and considered the above, you may decide that this option is just not worth the potential extra money.  If you do decide that a limited company is not for you and you would rather ensure you have the maximum possible time to get on with and enjoy the things that matter most to you, then give us a call or fill in the contact form and we will take the pressure, hassle and stress away – guaranteed.  Once you take into consideration the tax advantages and the sheer simplicity of becoming an employee of an umbrella payroll company, with only timesheets to complete and submit, you have to ask yourself seriously why you would want to bother doing anything else!