Limited Company vs Umbrella Company: what’s the difference?

When relocating to the UK, a common question people ask is whether they should trade as a limited company or work via an umbrella company. Each has its advantages and disadvantages, depending on your current situation and future plans and overseas experience.

Trading as a limited company while working in the UK usually involves an individual owning and managing their business. They trade by selling their personal services to an end user, often through a recruitment agency. Benefits include business independence and portability, and potential tax advantages. The downside is that the contractor is responsible for their own administration, payment collection, banking and tax.

In 2000, new tax legislation was introduced (IR35) which states that if you would have been an employee of your end user, other than for the existence of an intermediary company, then you will be treated as an employee for tax purposes regardless of how you organize your affairs. Know more about tier 5 youth mobility visa.

MyOE Australian Account Manager Jill Henderson says it was following the introduction of the IR35 legislation that the popularity of umbrella company grew.

“An umbrella company acts as an employer to contractors working at a fixed rate, usually through a recruitment agency. All remuneration is paid to the contractors via a combination of salary, bonuses and tax free expenses. The umbrella company handles the administration of timesheets, collection of payments from clients/agencies, tax, youth mobility visa and National Insurance calculations and payment to the contractors.”

Limited Company vs Umbrella Company: what’s the difference?

Ms Henderson says myOE recommends an umbrella company as the most efficient, safe and dependable way of working in the UK or work in the UK for Australians.

“An employment management company allows you to enjoy the benefits of contracting without the headaches of IR35, limited company administration, insurance costs and accountancy fees. Its simplicity makes it an attractive and flexible option for short term contractors.”

“Employment on a secondment basis with a UK ancestral visa umbrella company is one of the most effective ways to minimise the tax due on your UK income from the time you arrive. This arrangement also gives you up to 24 months of tax relief on your relocation and living expenses,” Ms Henderson said.

MyOE was established in 1998 to help professionals relocate to the UK for work by assisting with all aspects of the move from planning the relocation to providing a hub that can offer several tailored employment solutions, through to arrival and beyond.

MyOE offer the best UK Ancestry Visa deals on the market. MyOE makes sure you land on your feet in your new country and save on tax in your new job. Our contractor management service guarantees more take home pay.

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