When you initially went self-employed, you had a decision to make as to what sort of operation you worked as. If you chose to employ the services of an umbrella company, for example, you might be a little nervous about changing the way you work, but we want to give you the confidence to try, if you have been considering it.
If you have done a preliminary calculation as to what your take home pay could be as the director of your own limited company and it seems better than your current set up, you need to put fears of ending up washed out in the rain aside! It’s far easier to operate a limited company than you might think! So what will it entail?
Responsibility for all taxes and administration – While an umbrella organisation will take care of all this for you, as a limited company, you will need to take it on. However, with your business and personal finances kept totally separate, you won’t be held accountable for any debts that the company accrues.
Employ a great financial team – Your annual tax returns are not something you want to risk getting wrong, so we recommend hiring an experienced and efficient team to submit your return for you, if you aren’t confident. Don’t forget that their fee will also be tax deductible!
While it does put a lot more onus on you to be a responsible business owner, starting a limited company can be a great way to maximise your take home pay and ensure that all your legitimate business expenses are covered. When it comes to tax returns, receipts will be your best friend, so try to keep any that you accrue on a business trip and make sure all your financial records have been filed in a way that actually makes sense to someone other than you! Many accountants charge by the hour, so you don’t want them to spend five just trying to work out why you have labeled things the way you have!
Essentially, choosing whether to stay under an umbrella or go for a limited company approach will come down to confidence, how much free time you have to stay on top of your admin and cost-effectiveness. Which you place the most importance on will make your decision for you, but don’t be worried about asking your umbrella company for some advice too; they really will want the best for you and your money!