Making the Right Choice

In making the right decision you will need to weigh a number of factors based on your own circumstances and requirements.  There is no "always right" or "always wrong" solution - both methods will work for you but with different working arrangements.  In making your decision, we suggest you consider the following criteria:

1. Length of contract –
a. If you have a long term contract (over 12 months) or you intend to be a professional contractor and seek long term employment as a freelance contractor; a personal service company may be preferable.
b. If you have a short term contract (less than 9 months) and you do not wish to remain contractor in the long term; an umbrella company solution may be preferable.
2. Administration
a. Your attitude to administration, dealing with forms, returns, correspondence, accounts, spreadsheets, VAT returns etc. – if it is no problem, then take the personal service company solution
b. If keeping up to date with administrative duties is likely to be a problem, then the umbrella solution would be preferable.
3. Not Sure
a. If after reading this article you are still not sure and the decision to go “own company” or umbrella is still a difficult one, then it would probably be best to go with the umbrella company solution for at least the short term.
b. It is very simple to leave an umbrella company and start up your own company but very much harder in terms of administration and expense to go from your own company to an umbrella.
4. Caught by IR35
If your contract is caught by IR35, the decision between the two solutions will not materially affect your net pay.
5. Status
If you believe that it important to be a company director for presentation to third parties, then a personal service company solution should be taken