Deciding to leave the perceived security of a permanent role is arguably both an exciting and daunting time for virgin freelancers and contractors. Often the initial option for first timers is to become an employee of a PAYE Umbrella Company, like Genie Umbrella. Umbrella’s are one of the simplest ways to contract and manage your finances.
You may find that you can retain more of your hard earned money if your chosen umbrella is able to pay your expenses tax free and you should find that you have the same rights and entitlement as a permanent employee of any other business, including the following:
- Statutory Sick Pay, Maternity and Paternity Pay
- Holiday Pay
- Workplace Pension Scheme
If the independence and freedom of contracting is attractive to you as a long term option, the umbrella model is not the most tax-efficient way to operate as you could be paying more tax than you need to. For thousands of committed contractors, operating through their own Limited Company is the preferred route.
Moving from Umbrella to Limited is easy to achieve. You will need to determine the best point in time for you to do this and check that your Umbrella Company does not have any tie in periods. There is no formal “closing down” process when leaving an Umbrella as there would be for shutting a Limited company, you just need to be sure that the Umbrella Company fully pays you all amounts owed including any retentions for holiday pay etc. when you resign from their employment.
Many contractors make the switch at the beginning of a new contract; this is often easier from their agency’s perspective as it is cleaner to prepare the contract in the company name from the start of a new role, however, this is not a hard and fast rule.
Once you have decided to open your own limited company, you will be up and running in a matter of days. Your dedicated accountant will be able to offer advice on the best structure for your business and will begin talking to you about how to maximize the performance of your business and to take advantage of the tax efficiencies available.
A common misconception is that operating a Limited company leads to tedious administrative burdens; this is most certainly not the case. With Genie Accountancy you will get access to award winning cloud based software that was designed by contractors to specifically manage their businesses.
The software allows you to quickly and efficiently maintain your company’s records without taking any more time to manage your finances than you would have done as an umbrella employee.
The software allows you to quickly and efficiently maintain your company’s records without taking any more time to manage your finances than you would have done as an umbrella employee.
Once you have formed the habit of good record keeping, (perhaps ten to 15 minutes a week) and you have developed a good relationship with your specialist accountant you really won’t find running your company any bother at all.
For more information about moving from Umbrella to Limited, get in touch.
