Being a contractor, you have two ways on how to move forward, either setting yourself as a one person limited company or go down the umbrella company route. . You need to know your preference on how you position yourself as a contractor so that you would know what’s best for you.
Being under an umbrella company is the easiest thing for contractors. This is because you do not need to worry involving tax and invoicing. In simple terms, the umbrella company acts like an employer for freelance staff or contractors. It will also make you eligible as a PAYE employee. Therefore, before receiving the payment, all National Insurance and tax is already deducted from it. Being in this company will be good is you are unsure how long you plan to be self-employed, or for a few months. However, there may be instances that you will lose your freedom if you’ll enrol yourself in an umbrella company. Also, the payment will go a longer way since it will go from the client, to the umbrella firm and the contractor which will be prone to disputes. Also in the long run, it is quite a bit costly.
On the other hand, in a limited company, you are in full control of your business. You are the director, the big boss of everything. You just need to bear in mind to always document everything from the start, how you earn and spend. This is to avoid discrepancies in the reports to be submitted to the government. Also, in a limited company, you are responsible for working out how much tax you owe the Inland Revenue and filling in your Self-Assessment Form. You just have to be familiar with how it is done so that you can just do it even without the accountant. Working for yourself – in whatever capacity will always be rewarding and it gives you the flexibility of your working hours. You can feel your home and work life balance and you will feel you are in control of your life.
No matter what you prefer, it is important that you know the benefits and consequences of these types of companies. You just need to know yourself for you to be able to choose.
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