- The most tax efficient way of working
- Claim a wider range of expenses
- Higher take-home pay
- Lower personal financial risk if things go wrong
- Tax planning opportunities to save money
- Access to the Flat Rate VAT scheme
- Favourable option with clients
- Easier transfer ownership
- You can establish your identity as a brand
- Easier to raise investment
- A lot more time consuming and intensive
- Greater statutory obligations
- Higher costs and penalties if you don’t meet statutory obligations
- More responsibilities and duties under the Companies Act 2006
- You keep all the profits of the business
- You are in full control without having to consult other directors or shareholders
- No set up costs as you don’t need to register at Companies House
- Everything about your business is kept out of public records and is totally private
- The accounting process is much simpler for a Sole Trader than for a Limited Company
- Minimal administration due to fewer statutory obligations
- Less take-home pay compared to a Limited Company, from an equal turnover.
- You are personally liable to pay tax on all income earned.
- Your own finances and possessions may be at risk if things go wrong.
- Raising funding can be more difficult as you appear less established and less able to repay.
- Clients prefer the status of working with limited companies.
- Easy set up as you only need to submit your time sheets and then wait to get paid
- All tax and NI is deducted before you receive your money, so you will have no further taxes to pay
- Ideal for short term contracts or if you’re really just in between permanent jobs.
- Flexibility to choose the projects you want to work on, whilst retaining employment with your umbrella company.
- Ability to claim certain expenses
- Someone else will be doing the paperwork for you
- Ideal for contracts less than £25k per year
- You are reliant on the umbrella company to collect your money from the client and then to pay it to you.
- Lower earning potential
- Not as tax efficient as a Limited Company
- You are unable to create a brand identity to build your reputation in the marketplace.
|Recruitment Agency /PAYE
- Very little effort required as you only need to complete timesheets
- Less risk of not being paid as the agency is ultimately responsible for paying you
- Higher Tax
- Tax relief on expenses can’t be claimed
- The hourly rate offered is often lower than other options
- You could be perceived as inexperienced in the marketplace
- You are unable to create a brand identity to build your reputation