Answers · UK 2025/26
Should I use an umbrella company or limited company for contracting?
Umbrella company = simpler, employee-status, PAYE tax, no admin, but 5-10% lower take-home than outside-IR35 limited. Limited company = more take-home if outside IR35, but admin overhead, accounting costs, and IR35 risk. Inside IR35: umbrella usually equivalent or better.
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UK contractor structure: umbrella vs limited 2025/26. Umbrella: you sign with umbrella; client pays umbrella; umbrella deducts margin (£20-£30/wk) + tax + NI; pays you net as their employee. Pros: zero admin, holiday/sick pay, no IR35 risk. Cons: lower take-home (employer NI 15% effectively from your day rate). £500/day inside IR35 umbrella ≈ £62,500 net/year. Limited company: you decide salary + dividend mix; pay Corporation Tax. Outside IR35: ~£73,500 net at £500/day vs £62,500 umbrella. Cons: IR35 risk, admin, public records, accountant £80-£150/month. Decision: long-term + outside IR35 → limited; short-term + inside IR35 → umbrella.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.