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

[Guest Jill Henderson]

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.

 

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 visa for UK for Australians.