Umbrella Company vs PSC Limited Company Accountancy
We understand that there is sometimes a choice for contractors and freelancers to use an Umbrella Company or go through their own LTD Company depending on their IR35 status
This page explores some of the differences between Umbrella and PSC Limited Company
If you're not sure which options are available to you, give us a call and we'll be able to advise based on your current circumstances.
We've put together a short guide to give you an outline of the main differences between setting up your own LTD company versus using our PAYE Umbrella. Recent updates to IR35 legislation will now mean there are additional things to consider, and we'd be happy to run through our flexible options with you.
This is a guide only so we'd always recommend getting in touch with one of our Onboarding Team so they can run through the specifics of the service.
Minimum Period
Is there a minimum period that i need to contract for?
PAYE Umbrella
There is no minimum period with our umbrella service, so contracts from 1 day to 1 year are absolutely fine for us to set up. You can also leave as and when you need to, and we'll issue an electronic P45 once you have received your final pay.
Limited Company
While there are no minimum contract requirements, we suggest that you intend to contract for at least 6 months before going LTD
Earnings
Is there a certain amount i need to earn?
PAYE Umbrella
From Apr 2024, any pay rate over roughly £14.75 p/h may see you benefit from using the umbrella company
Limited Company
We recommend contractors earning over approximately £50k pa and with a minimum contract of 6 months consider a limited company setup, however please contact our sales team for advice and a projection so that we can assist you in getting the most out of your earnings
Admin
How much administration will i have to do?
PAYE Umbrella
You'll need to upload timesheets to our portal - unless your agency self-bill. All payslips and earnings summaries are available via our online portal.
Limited Company
A little bit of admin is required, but our online bookkeeping software allows you to upload bank statements & receipts with ease. We would estimate no more than 1-2 hours per month is required from you.
Costs
What are the costs?
PAYE Umbrella
There are no joining or leaving charges, just a fixed weekly or monthly cost depending on your pay frequency. Please contact your onboarding consultant to confirm the value.
Limited Company
Fees start from £99 + VAT per month payable by standing order from your business bank account. There is a one off Company Formation fee of £50 + VAT which includes new company set up, and all HMRC registrations.
IR35
Will IR35 apply to me?
PAYE Umbrella
If your contract is inside IR35, we would recommend using the umbrella. This will mean all employment taxes are deducted at source, so you won't need to declare anything separately to HMRC for this income.
Limited Company
You'll need to obtain your IR35 status from your client (or via your agency) in advance of setting up your LTD company. We would only recommend opening a new LTD company for contracts outside IR35.
Earnings
How much of my earnings will i keep after all deductions?
PAYE Umbrella
Your take home pay will depend on your income level, tax code, and other things like student loans and personal pensions.
Limited Company
If outside of IR35, then you can keep 70-90% depending on the pay rate and your own circumstances. We'll run a personalised example for you so you have an accurate idea of your take home pay, including self-assessment tax owed at year end.
Further Tax Savings
Are there any further ways i can reduce my tax liability?
PAYE Umbrella
By making pension contributions you can reduce your tax liability further. We also provide childcare vouchers so parents can still benefit from tax relief on these costs whilst using the umbrella company
Limited Company
You can save tax by making pension contributions, following certain drawing strategies and you may also benefit from VAT savings from using the flat rate VAT scheme
Insurances
Am I covered by your business insurance?
PAYE Umbrella
All business insurances are included in the admin margin (Employers, Public Liability and PI) so you are covered by Nasa Umbrella LTD when for contracts being paid via our payroll.
Limited Company
Nasa Consulting's £125+vat pcm service includes business insurance cover for your LTD company under our group policy. We'll issue certificates once you have registered.