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Forget about umbrella, it’s time to move on to a limited company

by Kobus Van den Bergh | Nov 13, 2017
  • As a contractor in the UK, you’re going to have to decide how best to structure your earnings. Two of the most popular options are a limited company or an umbrella structure. If you’re earning around £200 per day, then your decision should be a no-brainer.
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    Limited company, unlimited possibilities

    As an experienced contractor, there are many advantages to trading through a limited company structure. By setting up a limited company, you will benefit from:

    • Better take-home-pay
    • Increased earnings potential
    • Potential to grow an actual business

    Apart from these advantages, you will also have total control over all transactions and revenue streams of your limited company. Being a director or owning your company will mean you can receive dividends. When structured correctly, you won’t have to pay any National Insurance on your dividend earnings.

    See also: How long will it take me to set up a limited company?

    Putting your money where your tax was: Comparing umbrella and limited company take-home-pay

    If you earn at least £200 a day, you could be saving thousands of Pounds per year if you switch to using a limited company. Below is a table illustrating how much more money you will take home when you use a limited company structure.

    Daily rate

    Ltd co
    (net pay p/a)

    Umbrella
    (net pay p/a)

    You take home an extra:

    £200

    £36,051

    £31,722

    £4,329

    £300

    £51,434

    £44,072

    £7,362

    £400

    £63,463

    £55,285

    £8,178

    £500

    £75,491

    £66,497

    £8,994

    Closing the umbrella

    If you’re set up as an umbrella company, making the switch to a limited company isn’t as difficult as you might think. However, the timing is vital. The best time to switch to a limited company structure is between contract renewals.

    If you decide to register as a limited company mid-contract, your contract will need to be reviewed and altered. Your client or agent would also need to agree to the switch.

    Want to set up your limited company?

    Don’t go it alone

    You need to ensure that you consider your own unique circumstances and requirements before making a decision that will affect your finances. It’s hugely important for you to consult professional contractor accountants who specialise in this sector.

    With the right advice, you can be confident that whatever decision you make is the right one for you and your business.


    Give our accounting team a call on +44 (0) 20 7759 7530 or send us an email at contracting@sableinternational.com for more information.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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