Anyone work under an Umbrella Company or is Ltd. better?

[freddynewbie]

Hello I'm a newbie here so please be gentle!

I'm about to start contracting (in Architecture) for the first time starting next Monday having spent a year on the dole. Has anybody who does contracting worked for an Umbrella Company or do they do it themselves as a Limited Company?

For an Umbrella Company as far as I can see you basically pay them a flat fee of around 4% of your gross income each week as their fee and they sort out your tax/NI etc, if you have expenses they sort that out too. They tell me there are no joining or leaving fees or minimum terms.

Working as a Ltd. Company I'd need to set one up and have an accountant sort it out for me which would also involve creating a company bank account.

At the moment with my simple brain (and it is simple) as far as I can see it may cost a little more to use an umbrella company overall but it is likely to be easier.

I'm also thinking if I find I am still contracting in say 6 months I could set up a Ltd. company at that point but if I ended up getting a permanent job after say 6 months setting a Ltd. company up now might be a bit of a waste?

Anyone care to add their comments/thoughts?

Any comments appreciated.

 

[gezzagregz]

Hi Freddy,

Firstly congratulations on landing your contract.

Umbrella or Limited?

There are a couple of things when deciding on which route is best for you;

1. IR35 - This legislation will determine whether you have the right to take advantage of the tax benefits associated with operating through your own Limited Company (if indeed you want to). You can get a better overview by watching this video: IR35

2. Basis of payment - What are your rates? If you fall outside IR35 and you are on rate higher than £16.00 per hour (as a rule of thumb), it's worth looking into your own Limited Co

3. Working practice - I'm sure that working in Architecture requires you to be highly skilled (can help determine your IR35 status).

4. Personal preference - if you want a quick and easy setup - Umbrella, but if you don't mind being a director of your Ltd Company (extra responsibility, but accountants like Danbro can help), reaping the rewards - Limited.

Depending on your contract rate and ir35 status etc, setting a limited company for just 6 months could still be profitable and worthwhile, however I would suggest you speak to a specialist contractor accountants who can provide you with some unbiased advice to which solution is best suited to your individual needs.

hope this helps!

 

[gezzagregz]

also - if you do go through an umbrella do not use one that charges a % of your gross! use one with a fixed fee.

 

[freddynewbie]

Hi gezzagregz,

Thanks for replying, my rate will be £17.50 an hour, I don't know whether this will be for 3 months or 6 moths or what. My research is edging me towards using an umbrella company for now but if in say 6 months I am still contracting (as opposed to permanent) I can look at going Ltd. at that time. I'm really a complete novice when it comes to tax etc and the thought of running a Ltd. company scares the hell out of me.

 

[gezzagregz]

an umbrella solution does sound fitting to your circumstances especially if you are unsure about your contract length and whether you anticipate working for the longer term.

Again - 4% of your gross could be quite high depending on the number of hours you decide to do. (e.g. 40 hours - their fee would be £28.00 a week).

 

[paultnl]

I used to use http://www.parasolgroup.co.uk/ and found them very good.

 

[MrPAYE]

You can get a better overview by watching this video: IR35

I (usually) manage to be enthuastic about employment taxes as that is my chosen profession - but a video about IR35 ???? C'mon !!! Watching paint dry would be more interesting....

I am embarrassed to say that I actually clicked on the link but I stopped as soon as I saw the opeing slide "IR53". Funny yes but embarrassing and amateurish for the 'expert' responsible.

 

[gezzagregz]

I (usually) manage to be enthuastic about employment taxes as that is my chosen profession - but a video about IR35 ???? C'mon !!! Watching paint dry would be more interesting....

I am embarrassed to say that I actually clicked on the link but I stopped as soon as I saw the opeing slide "IR53". Funny yes but embarrassing and amateurish for the 'expert' responsible.

i agree with you there, however it is still an important topic for any contractor debating whether to go Ltd.

Have you not heard that they have changed it to IR53? (pulling your leg).

 

[freddynewbie]

OK, after much Googling I think I'm gonna go with CrystalUmbrella, does that ring any alarm bells with anyone? I've rung about six different ones today and they all seem much of a muchness to be honest, their fees (CrystalUmbrellas) would be £27.50 a week which seems fairly typical and I'll end up with a dedicated advisor with a direct line. Sound OK?

 

[elaine@cheapaccounting]

Why not post in one of the contractor forums on this?

They may be able to advise more

 

[gezzagregz]

umbrella detective is quite good.

 

[freddynewbie]

Thanks to everyone who replied, I went with Crystal Umbrella in the end, I can always change if they're service is a bit rubbish.

 

[longleaf1]

If you do need to change at any point.
I can recommend Liquid Friday (used to be pay4u) used them loads over the years and never had any problems.