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Limited company vs umbrella company

5/23/2017

At Tax Affinity Accountants, we often get asked what are the differences and benefits of working through a limited company compared to an umbrella company. So we have decided to explain this in a quick easy way.

An umbrella company is like an agency with whom you are employed and therefore they are your employer and not the place where you work. They will issue you with payslips and P60, P11d and a P45 at the end of your employment. They should also pay you for any sick or maternity pay as may be required. Umbrella companies will charge you for using their services and will deduct their fees from your pay. They will also ask to be refunded their employer NIC contributions paid to HMRC on your behalf again deducting this from your pay. The income tax tends to be higher than being straight forward employed on PAYE. You do not need to worry about paperwork and record keeping as the umbrella company does all this like an employer would.

A limited company is a separate legal entity to you. That you may well own as a shareholder and run as a director. A limited company can be your employer and pay you wages via PAYE like a normal employer but be contracting out your services to the place you work. And if you are the shareholder it can pay you dividends (share of the profits) periodically or on a regular basis. A limited company pays corporation tax not income tax and the tax rate is much lower than normal PAYE or via an umbrella company. There is a certain amount of paperwork and record keeping which is required and normally you will require the services of a good accountant. It is also very difficult to try to pay yourself sick or maternity pay, which is why most people do not claim these. But the plus side is as your keeping more income then this should more than make up for any loss of benefit or time spent keeping records.

Tax wise it is usually much better option to be working though a limited company compared to an umbrella company as a good accountant, like Tax Affinity Accountants, should help you save much more in tax than fees they ever charge. Helping to ensure more of your hard earned income stays in your hands.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting contractors and self employed people throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

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Tax Return 16/17 now due

5/8/2017

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Thousands of reminder letters from HMRC have begun to drop on across door steps in the UK. The tax year ended 5/4/17 ie 2016 -2017 self assessment is now due to be completed and the sooner you do it the sooner you can get a refund of income tax or know how much you need to save and pay.

If you already have a personal UTR - unique tax number then the letter may have already arrived or will be on its way. If you do not then you may need to ensure you or your accountant has applied for one to allow for its submission.

Who needs to do a tax return?

You’ll need to have a personal tax return calculated and submitted if, in the last tax year:

you were self-employed in a previous tax year, or had income in any capacity other than employed ie income from overseas, property, dividends, sale of investment property or assets etc
you received more than £2,500 in untaxed income, for example from tips or renting your property etc - if you received less than £2,500 you may still have to complete a tax return
you received income from your savings / investments which was £10,000 or more before tax
your income from dividends from shares and investment portfolio's was £10,000 or more before tax
you made profit(s) from selling things like shares, a second home or other assets and need to pay capital gains tax to HMRC
you were the director of a limited company registered at Companies House - unless it was for a non-profit organisation (limited by guarantee or registered charity) and you have not been paid or received any benefits, like a company car, medical cover, gym, travel, company phone etc
your income (or your partner’s) was over £50,000 and one of you claimed child benefit in the tax year 16/17
you have had some income from abroad that you needed to pay tax on - the money need not be exchanged into Pound Sterling or come into the UK for it still to be taxable
you lived abroad and had a UK income - which more than likely was declared as non-domiciled income and therefore not tax correctly eg rental property and overseas landlord
your employed income was over £100,000 - eg higher earner with possibly a P11d also
you were a trustee of a trust and/or registered pension scheme - and therefore like a company director are required to clarify your tax position each year
you had a P800 form posted to you from HMRC saying you may not have paid enough tax last year - could be due to your tax code not deducting the correct amount of tax
you fall into a certain category of worker eg religious minister or Lloyd’s underwriter etc
if you’ve been told to submit a tax return by HMRC - even if it just an email not a letter

If your not sure contact an experienced quality accountant like Tax Affinity Accountants and they would be happy to advise.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting self employed people throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

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Limited company vs umbrella company

Tax Return 16/17 now due

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