The two most popular ways for contractors and freelancers to get paid is either setting up their own limited company or becoming an employee of an umbrella company. There are benefits to both, and we’ll give you a better insight into the two and help you decide which is best for you.
Before you begin contracting, or take on a new assignment, it is recommended that you thoroughly research which payroll option is best for you. External factors such as the length of the contract, whether it is inside or outside IR35 and rate of pay could mean that you are better suited to working through an umbrella company. More information about IR35 can be found in our IR35 guide.
Setting up your own limited is, if circumstances permit, the most tax efficient payroll option as you can pay yourself through a combination of dividends and salary. You also have the possibility of reclaiming some expenses. Our sister company Bluebird Accountancy provides you with all the tools you need to manage your limited company accountancy and bookkeeping.
A limited company is better suited to contractors and freelancers who:
- Are working on multiple contract roles alongside each other, have taken on one long-term contract or are expecting to be a contractor for a long time
- Are earning more than £15 per hour
- Are happy to take on more administrative tasks that come with setting up a limited company
- Want more control over their company’s finances
- Are comfortable with being the director of their own limited company
Bluebird Accountancy offers a modern-day accountancy payroll solution for contractors who want to manage their own accountancy and bookkeeping using FreeAgent software. The all-inclusive package is only £95 + VAT per month. For more information call 0808 301 2389.
Bluebird Accountancy’s package includes:
- No joining or leaving fees
- No fees to switch to Bluebird Umbrella if your circumstances change
- Free set up and company formation
- Access to FreeAgent
- Registration of taxes including PAYE, VAT and Corporation Tax
- Quarterly VAT returns
To view the full accountancy package and all of its features click here.
Becoming an employee of an umbrella company may be a better payroll option for you if any of the following apply:
- You are new to contracting and are unsure if you will be doing it for the long-term
- You only work on short-term contracts
- You prefer a more hassle-free approach and do not want to do any of the administration associated with setting up a limited company
- You are earning less than £15 per hour
- You are caught by IR35
Bluebird Umbrella offers a simple, hassle-free online payroll service for contractors and freelancers who want a no-frills umbrella service for excellent value. Our packages are extremely competitive – from only £7.50 per week. Please fill out our online form and you could be set-up in minutes!
Bluebird Umbrella’s package includes:
- Free umbrella company set up in a matter of minutes
- No fees to switch to Bluebird Accountancy if you choose to set up your own limited company in the future
- No tie-in period or closedown fees
- PAYE tax and National Insurance Contributions are paid to HMRC on your behalf
To view Bluebird Umbrella’s full package, click here.