Here’s the secret to getting your business finances working for you

We asked SJD Accountancy, specialist contractor accountants to interim managers for over 20 years, to share some hints and tips on how to decide what’s best for you.  

‘Horses for courses’

All Interim Managers are unique, especially when it comes to your finances.  Whether you move from contract to contract, or spend some of your time contracting and some of your time as a permanent employee, how you decide to manage your finances is important.  

The choice is simple

Freelancers, interim managers, consultants and contractors have a simple choice to make, either to operate as a Limited Company or through the services of an Umbrella company.  Both options offer advantages and disadvantages, but it may seem a little daunting to know which option is best for you. 

There are no hard and fast rules about whether Limited Company or Umbrella services are more suited to particular industries, professions, lifestyle or age range.  At the end of the day, the choice is yours which route you decide to go down.

So here are three things to consider and ask yourself before you reach a decision, so you can have confidence you are getting the very best out of your finances today and in the future.

Understanding the Limited Company option

A Limited Company is an organisation that you can set up in order to run your business.  Limited companies have their own legal identity so they can own assets in their own right and are responsible for their own income and outgoings, meaning that your company finances will be completely separate to yours personal finances.  When a Limited Company makes a profit it is owned by the company.  As the Limited Company director you will be an employee of your limited company, so your company can pay you a monthly salary.

Understanding the Umbrella option

An Umbrella Company essentially acts as your employer.  If you choose to operate through an Umbrella Company then you are required to complete and submit time sheets and expense details to the Umbrella company.  They will then collect payment from your client and pay you a monthly salary with income tax, national insurance and their fee deducted.  Fees range from £25 - £35 per week.

Which route should I choose?

Here is a comparison table which should help you select the option that best suits your circumstances.  Why not take a few minutes to weigh up the advantages and disadvantages of operating through an Umbrella company or setting up a Limited Company. 

Limited Company or Umbrella Services Advantages

 

Further information and personalised comparisons are available here.

About SJD Accountancy

SJD Accountancy is the UK’s largest specialist provider of fixed fee Limited Company accountancy services to interim managers, contractors, and freelancers.  They are the only national specialist firm with offices in all major UK cities and the chosen accountancy firm for over 15,000 clients. 

Author: Jaime Thorpe has over 14 years’ experience in contractor accountancy and has a wealth of knowledge and experience to answer any questions you may have surrounding Ltd v's Umbrella, Expenses, IR35 and Tax Planning.

To find out more about how SJD can help you improve your financial planning click here.