As a contractor it is likely you will face a lot of crucial decisions. After all, this is a line of work that offers a lot more freedom, and as a consequence you have much more power in your hands. One of the main decisions you need to make is whether to set up a limited company or use the services of one of the available PAYE umbrella companies in the UK. This is not a decision that should be taken lightly. There are various advantages and disadvantages associated with both options. This post will assess these in order to help you come to the ideal solution for you.
First and foremost, let’s begin by explaining what these options are in further detail. A PAYE umbrella company is one that will technically employ you. Thus, by doing this, they will take care of all of your invoices, taxes, paperwork and alike. All you need to do is submit your timesheets. You will pay the company for their services, yet complexity is minimised as you receive your payment as a PAYE employee. On the other hand, you could decide to set up a limited company instead. If you do this, you will decide on what wage you take from the business, you will have to set up your own business bank account, and your company must be formed by official channels.
These two options are extremely diverse from one and other. Thus, you need to consider them both very carefully. There is no right or wrong when deciding what to go for. It is all about finding what works for you. So, let’s begin by assessing the benefits associated with PAYE umbrella companies. If you use one of these organisations, the great news is that you won’t have to do any paperwork at all. This is an option that is extremely convenient and easy. Simply enter your details and submit your timesheet and the company in question will take care of the rest. This frees up time so you can focus on doing what makes you money. Moreover, it puts your mind at ease because you know that everything will be handled above board and your taxes will be paid. A PAYE umbrella company is a great option for those who earn less than £25 per annum, as well as those who are unsure if contracting will be their long term solution. After all, you don’t want to set up a limited company if you are only planning on contracting for a short period of time.
Now you know all of the benefits associated with using an umbrella company, but what about setting up a limited company instead? One of the main advantages associated with this option is the ability to claim a broader selection of expenses. If that wasn’t enough, you will also get accessibility to the scheme for Flat Rate VAT. Finally, one of the main aspects people like is that they will be in complete control. After all, if you go down this route you are running your own business, and thus you are not relying on another company.
So, what will it be? A PAYE company or a limited company? The choice is up to you!
If you are a contractor it is likely that you will experience the dilemma of choosing between using the services provided by PAYE umbrella companies and setting up your own limited company. This post helps you assess both options.