G1 Umbrella Company Alternatives

As a contractor you don't have to use an umbrella company. prior to the year 2000 (the year of IR35), contractors had no option but to set up & manage their own private limited company. Today, the umbrella company service is perfect for every contractor who wants minimum hassle & zero red-tape.

Legitimate umbrella company alternatives include setting up your own private limited company or using the services of a recruitment agency PAYE scheme.

Dodge-ball

There are also some dodgy schemes out there - beware! If you come across any of the following be very careful:

• Offshore
• EBT
• 80%+ take home pay
• Loan schemes / Special schemes / Incredible schemes

What Are Your Options?

You have two mainstream options if you do not want to use an umbrella company.

1. Recruitment Agency PAYE - 'going agency PAYE'
Quite simply, you become an employee of the recruitment agency that finds you the contract role. The recruitment agency is your limited company and will sign the contract with your client - with you as the named contractor doing the work.

Trading through your recruitment agency is a no-brainer. Unfortunately... this method is terrible in terms of net pay. You pay the most tax when going agency PAYE.

You're not allowed to claim any expenses, so your entire gross pay will be at the mercy of income tax & National Insurance. An umbrella company is almost as simple and you'll get a higher net pay.

Not all recruitment agencies offer this alternative, there's quite an extra cost burden to set up and often it's just not worth their while to do so.

2. Set Up & Manage your own Limited Company
Setting up and running your own limited company is fast losing its appeal to most contractors. It's often more expensive than the service of an umbrella company, and certainly requires a lot of input from you on a regular basis. It's like a second job, on top of your contract roles.

It'll be your neck on the line if the company isn't compliant in any way. What puts off quite a few from this route is the many complex rules to understand - across a wide range of disciplines. You'll have to appoint an accountant and this isn't the only extra cost.

Additional information:

• Alternative to an Umbrella Company
• Alternatives to using an Umbrella Company
• Behind the Scenes with an Umbrella Company Managing Director
• Comparing an umbrella company service to managing your own limited company
• Contracting Versus Permanent Employment
• Contractors have Never Had it so Good
• Fed up Managing your own Limited Company
• Own Limited Company 24 Month Rule
• What are the Advantages of Running your own Limited Company
• What are the Advantages of Using an Umbrella Company
• What you need to Consider when Running your own Limited Company
• Which Option is Best for you Own Limited Company or Umbrella Company