Umbrella company vs limited company UK
Which structure gets you more take-home, less hassle, and better protection from IR35?
Umbrella company
An umbrella company employs you and runs PAYE. You submit timesheets, the umbrella invoices the agency or end-client, and after deductions you receive net pay. It's the simplest option — no company accounts, no Corporation Tax, no dividends to manage. The trade-off is take-home: you'll typically keep less than via a limited company outside IR35.
Limited company (PSC)
A personal service company (PSC) is your own limited company. You take a small salary (often around the NI threshold) plus dividends from post-Corporation-Tax profit. Outside IR35, this is usually the most tax-efficient structure, especially above £50k of profit. Inside IR35 the advantage largely disappears.
Side-by-side
| Factor | Umbrella | Limited (outside IR35) |
|---|---|---|
| Take-home pay | Lower | Higher |
| Admin burden | Minimal | Moderate (accounts, VAT, PAYE) |
| Suits short contracts | Yes | Less efficient |
| Inside IR35 | Designed for it | Tax benefits lost |
| Expense claims | Very limited | Wider allowable list |
| Setup cost | Free | ~£12 + accountant fees |
Which should you choose?
- First contract or short engagements: umbrella keeps things simple.
- Inside IR35 contracts: umbrella usually makes sense.
- Outside IR35 with £50k+ income: limited company is normally more tax-efficient.
- Multiple clients & varied work: limited company offers more flexibility.
Use our take-home pay calculator to compare scenarios for your day rate.
General guidance only. Personal circumstances and IR35 status materially change the answer.