Understanding the differences between operating through your own limited company or being paid via umbrella is very important in your first steps towards contracting.
We’ve broken each option down into a quick and easy guide to help you make an informed decision.
Definition: a private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested.
A limited company is something everyone can have. If you want to become a contractor, all you need to do is choose a name, register it online for a small fee and, after sending all the required information, your company will then be listed on Companies House. All its information will then appear on the public register.
Once the company is registered, you officially have a business and you become the director, therefore all responsibilities, including both financial and administrative, are taken care of by you. You must make sure all the correct insurances are in place and a business bank account has been set up.
However, it is important to know that information regarding your limited company will have to be updated on an annual basis, even if you take a step away from the business altogether. If you find yourself struggling to handle the financial administration then it is often advised you bring in outside help, such as accounting services offered by us at Optimum Pay.
By using a PAYE umbrella company like us, you will not be a director and therefore all your responsibilities are drastically reduced. We are with you every step of the way, helping you get registered as a contractor and ensuring everything runs smoothly with your payroll and HMRC reporting.
Once you are set up, we then become both your employer and accountant, handling everything from timesheets, expenses, insurances and umbrella fees. We’ll also take care of your pension, holidays and maternity or paternity leave. We deduct all necessary fees and taxes from your gross pay, leaving you with a salary paid to you.
A major benefit of using an umbrella company is that it offers a far more hassle-free approach to contracting, perfect if you’re just starting out as a contractor and are looking for support and guidance to navigate HRMC’s regulations.
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