As a contractor you would want to either be inclusive in a limited company or umbrella PAYE company which is when you -pay as you earn policy kind of tax that you would have to pay. Though both have their own advantages or disadvantages. You would have to work on them and decide which suits you better. The suitability will depend on your needs and the way you want to work. This also depends on other factors such the experience of work, the amount of time you would spend on the contracting work and the time for paperwork.

To get your own limited company

if you will be doing the contracting as it will be when you own the limited company. You will end up having to look after the accounts, the salary you get and the taxes you would have to pay. After establishing your limited company, you would have to open a bank account. Since you will end being the director of the company you have set up it would be obvious that you would have to invoice the payments to the bank and settle a salary for yourself too. The salary itself will be an amalgamation of the amount you pay for the services as well as the dividends you intend to get as the owner of the company.

PAYE umbrella contracting

The umbrella company will be responsible for all the above-mentioned tasks and acts as an employer as well. Your duty would be perhaps to give the time sheet to the employer who will process out the salary that you are to be paid after the tax deductions and the national insurance.

What you can look forward to

  • The contractors are under a fixed term contract assignment.
  • It tries to provide tax relief from IR35 legislation.
  • You get to sign contract of employment.
  • Provides a payroll on behalf of the contractor.
  • Has the responsibility of the social contributions as well as the tax deductions.
  • The recruitment process is done on behalf of the client.

Here the difference between a limited contractual company and the umbrella PAYE company come to the fore. The umbrella companies will have a margin they charge and the schemes they run for acting as employers would be tad different. The travel and subsistence of the contractor are taken care of.

The benefits of being a part of umbrella

You get statutory payments such as the sick pay, maternity pay, holiday pay, clinical counselling, legal support, dependent care, critical incident support are all provided for by the PAYE umbrella company for acting as an employer for the contractors.