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Umbrella or Limited Company

Getting paid through Umbrella or Limited Company? What is best?

Let us assume that you work as a contractor through an agency and you get paid £30,000 per year. How much tax will I have to pay as an employee through the Umbrella, and what tax will I have to pay if I setup my own Limited company.


Working as employee under Umbrella:

Salary                                                                                                            £30,000

Less Personal allowance                                                                           £11,000

Taxable income                                                                                           £19,000

Income Tax 19,000*20% =                                                                          £3,800

Ni tax 21,940*12%=                                                                                       £2,632

Total Tax paid £6,432

Taken home after tax                                                                                £23,568


Working as Limited Company:

Income                                                                                                          £30,000

Less Salary                                                                                                    £8,060

Net Profit                                                                                                      £21,940

Assume no expenses to charge

Corporation tax 21,940*20%=                                                                    £4,388

Retained profit                                                                                             £17,552

Take all as Dividend

Tax payable 17,552 less (5000+2,940) £9,607

Tax payable on Dividend £9,607 * 7.5%=                                                  £720

Total Tax paid £4388+720 =                                                                       £5,108

Taken home                                                                                                £24,892


Total tax saving as Limited Company £6,432 – £ 5,108 =       £1,324


Don’t forget under the company there will be some expenses which this will reduce corporation tax even further.