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If you’re an IT professional who wants to take charge of their working life, becoming an IT contractor is an ideal way to do away with some of the more inhibiting aspects of permanent employment. The best contract jobs allow you the freedom to embrace the things that made you choose your career in the first place.
Today there are around a quarter of a million people taking on IT contracts in the UK, and the demand for their services is high. There are many reasons employers want to take on temporary rather than permanent staff but veteran IT professionals, with their high level of expertise, are especially attractive because it’s easy for them to ‘plug in’ to an existing team.
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Should I join an umbrella company or form a limited company?
This is an issue all contractors face and there’s no right answer.
We’ve collected together a selection of our preferred umbrella companies so it’s really easy to get started with a quote and see how much more you could be bringing home every week.
If you’re still making up your mind, here are some factors you may wish to consider:
- Reduce your administrative load
Umbrella companies charge an up-front fee but they do provide an important service – they take all the hassle out of your administration. You don’t have to worry about working out your taxes or making sure you’re paying the right amount of national insurance. It’s all done for you and all you need to do is collect your gross pay. Umbrella companies are an ideal option if you’re just beginning your IT contract work as it lets you see if this is the life for you without having to shoulder the responsibility of running your own business.
- Circumvents all IR35 worries
As the umbrella company is technically your employer, you don’t have to worry about being take to court because you’ve fallen foul of IR35.
A Limited Company…
- Gives you tax breaks
In exchange for the hassle of managing your taxes, HMRC allows contractors with a limited company to write off things like travel, accommodation and other working expenses. You will, however, have to pay corporation tax and VAT, if you decide to register for it.
- Allows you to draw dividends and avoid higher taxation
Running a limited company can be extremely lucrative, especially if you keep abreast of the changes in taxation laws. However, HMRC is closing the loopholes and reducing the tax-free allowances on dividends that have allowed limited companies to pay out significantly higher returns to their owners. Limited companies are still the way to go if you want to maximise your take-home pay but they demand real commitment and understanding of your financial affairs. A lot of limited company owners find themselves in the position of hiring an accountant to provide contractor advice and allow them to offload some of the more complex financial procedures.
So which is right for you? Umbrella or limited company? Ultimately, it’s up to you to decide what’s more important: your money or your time.