close menu

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.
    arrow-chart

    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.

    • Tax refund money
      11 excellent ways to spend your UK tax refund
      Apr 09, 2019  |  by Kobus Van den Bergh
    • London-business
      The UK still the best country for business in 2019
      Apr 04, 2019  |  by Scott Brown
    • Contractor choosing door
      Contractor insurance: Choosing the right cover for your risks
      Mar 12, 2019  |  by Kobus Van den Bergh
    • Making Tax Digital for VAT
      Making Tax Digital for VAT deadline: What you need to know before April 2019
      Feb 18, 2019  |  by Scott Brown
    • Businessman-running
      Did you overpay HMRC? Here’s how to get your tax refund
      Feb 07, 2019  |  by Kobus Van den Bergh
    • Business
      Will 2019 be a good year for UK contractors? IR35 and the loan charge
      Jan 24, 2019  |  by Ashley Deakin
    • Business-concept
      Moving your business to the UK? You’ll need to understand the UK’s VAT regulations
      Nov 12, 2018  |  by Scott Brown
    • Autumn-statement-banner-no-logo-white
      Highlights from the 2018 Autumn Statement
      Oct 30, 2018  |  by Scott Brown
    • man-in-front-of-shop
      A quick guide to UK business tax
      Oct 26, 2018  |  by Scott Brown
    • working-man-contractor
      Self-employment vs. contracting in the UK: What’s the difference?
      Oct 11, 2018  |  by Kobus Van den Bergh
     
     

    South Africa

    Cape Town

    Regent Square
    Doncaster Road
    Kenilworth 7708 +27 (0) 21 657 2120

    Durban

    25 Richefond Circle
    Ridgeside
    Umhlanga 4320 +27 (0) 31 536 8843

    United Kingdom

    Croydon

    One Croydon
    12-16 Addiscombe Road
    Croydon CR0 0XT +44 (0) 20 7759 7514

    Australia

    Melbourne

    9 Yarra Street
    South Yarra
    VIC 3141 +613 (0) 8651 4500

    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services Licence issued by ASIC to deal in foreign exchange (1st Contact Group - AFS Licence number 335 126).

    We use cookies to provide the best website experience for you. Using this website means that you agree to this. How we use cookies.