If you have been contracting for a while using an umbrella company and you have decided that you like the lifestyle and the challenge that contracting gives you, then it will be more beneficial to operate through your own limited company.
We have a number of clients that have come to us wanting to move from an umbrella company and set up their own Limited Company and it is quite simple to make this change, although you do need to be organised.
Here are a few practical considerations for you to consider:
- You will need your own Limited Company, you can set a company up yourself via Companies House;
- You will need to open a company bank account;
- The new company will need to register with HM Revenue & Customs for corporation tax;
- In addition the new company will need to register for PAYE and possibly VAT.
You can do these things yourself or Clearways Accountants can do them for you.
You may have a notice period on your umbrella contract so you should provide the required notice and it is helpful if the umbrella contract finishes on the same date as your current agency/client contract.
When you leave the umbrella company you will receive a P45, you should keep this as you will need to pass on the details to your payroll (PAYE) provider.
Your new agency contract will need to be in your new company name and so invoices will need to be issued in the company’s name and payments will need to be made into the company bank account.
The agency will need to tell your client that you are now operating through a Limited Company and so you should contact the HR Department at your client and inform them of the change so that they are not surprised when the agency provides new information.
As you will be operating through a Limited Company you may take profits out of the company by way of a salary and/or dividends and it would be sensible planning to take advice on the correct amount of each that you should take. Also as you are operating through your own company, the IR35 legislation may affect you (and you company) so it may be a good idea to get your contract reviewed for compliance with IR35. Please use a PCG accredited accountant, such as Clearways Accountants, as these firms have undertaken extra training on IR35 and contract reviews.
It can seem a little daunting to roll up your umbrella company and work through all these tasks but here at Clearways Accountants, we can take care of most of the administration, leaving you free to talk to your client and agency.
If you would like to contact us and learn more about contracting through your own Limited Company then contact us for your free one hour consultation.