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What are the pros and cons of working through an umbrella company?

Paystream News

Michelle Derungs

Monday 26th Oct, 2015

Deciding whether to work through an umbrella company or a limited company can be confusing, however finding the right option for you is not just about what you want to do but it is also dependent upon your circumstances. For instance, if you fall inside the scope of the IR35 legislation then working as an umbrella company contractor is the best solution for you.

Advantages of working through an umbrella company

  • It is probably the most hassle free route as you can be set up with an umbrella company service provider in a matter of minutes.
  • Umbrella companies are ideal for short term contracts or if you are new to the world of contracting.
  • Staying with the same umbrella company gives you continuous employment which is important when applying for mortgages.
  • Your umbrella company will take care of all your paperwork including deducting the necessary PAYE and NI deductions for HMRC.
  • You have the ability to offset allowable business expenses like travel, meals and accommodation against tax.
  • You are never committed to working through an umbrella company, should you wish later down the line to form a limited company you can do so easily.

Disadvantages of working through an umbrella company

  • Working through an umbrella company is not as tax efficient as working through a limited company.
  • You do not have as much control over your finances like you would as a limited company contractor.

Working through either an umbrella company or limited company each comes with its advantages and disadvantages. The important thing is to decide which way of working suites you best. If you want the easiest hassle free route with little to no administrative burden then working through an umbrella company may be the best choice for you.

If you'd like more information on how our umbrella company service, My Max, can benefit you then please click here.

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