Switching from an umbrella company to your own limited company can lift your take-home, because a director can take a tax-efficient salary plus dividends instead of paying PAYE on everything — but it only pays off if your contracts are outside IR35, and you take on the admin that the umbrella used to handle for you. On an umbrella you're an employee, taxed under PAYE, with the employer's National Insurance and the umbrella's margin coming out of your assignment rate. Run your own company and you keep control of how you draw money, but you're now responsible for the accounts, the Corporation Tax return, the annual confirmation statement and VAT if you cross the threshold. The switch is a defined sequence: check your IR35 status, form the company (or buy one off the shelf), open a business bank account, register for the right taxes, tell your agency, and appoint an accountant. Here's how each step works — and when staying on the brolly is the smarter call.
Figures are for the 2026/27 tax year and sourced to gov.uk; they change at each Budget. General guidance, not personal advice.
Umbrella vs your own limited company — what actually changes?
The headline difference is how you're paid and who keeps what. On an umbrella you are an employee of the umbrella company, so all your earnings are taxed under PAYE — income tax and National Insurance on the lot, with no dividends available to you. The employer's National Insurance and the umbrella's margin are deducted from your assignment rate before you ever see it, which is why the umbrella's "rate" and your net pay look so different.
Run your own limited company and you become a director and shareholder. You can pay yourself a modest salary and top it up with dividends, which carry no National Insurance and — above the £500 dividend allowance — are taxed at 10.75% in the basic-rate band and 35.75% in the higher-rate band for 2026/27 (gov.uk). That salary-and-dividends mix is what makes going limited tax-efficient. The trade-off is admin: company accounts, a Corporation Tax return, the annual confirmation statement, payroll for your salary, and VAT once your turnover passes the threshold. For a fuller side-by-side, see our guide to umbrella vs limited company.
There's one condition that overrides all of this, and it's worth being blunt about: the salary-plus-dividends advantage only exists if your contracts sit outside IR35. Inside IR35, you're broadly taxed as an employee anyway, and most of the benefit disappears. So before you do anything else, settle the IR35 question — our IR35 explained for directors guide walks through how status is decided and who decides it.
Want the decision laid out before you commit to anything? Our free guide covers the umbrella-to-limited move and the tax structure behind it.
The switch is a genuine sequence — each step depends on the one before it. Done in order, most contractors are trading through their own company within a couple of weeks.
Check your IR35 status. This is the gate. If your contracts are outside IR35, going limited can be genuinely tax-efficient; if you're mostly inside, the maths usually doesn't work and you should pause here. HMRC's CEST tool gives an indication, but a proper contract review is worth getting before you incorporate.
Form the company — or buy one off the shelf. You can incorporate a new company yourself, or take an off-the-shelf (ready-made) company to start trading almost immediately. Our how to set up a limited company guide covers the formation route, the directors and shareholders, and what Companies House needs.
Open a business bank account. Your company is a separate legal entity, so its money must run through an account in the company's name — not your personal one. See does a limited company need a business bank account for why this matters and what you'll need to open one.
Register for the right taxes. Register the company for Corporation Tax, set up PAYE so you can run your own salary, and register for VAT if your turnover will exceed (or is expected to exceed) £90,000 over a rolling 12 months.
Notify your agency or end client. Tell the recruitment agency or client that you're moving from the umbrella to your own limited company. They'll need your company details to pay you correctly, and they'll re-confirm your IR35 status for the new arrangement.
Appoint an accountant. The admin you've just taken on — accounts, the Corporation Tax return, payroll, VAT — is exactly what a partner accountant handles day to day. Getting one in place from the start keeps the company compliant and your salary/dividend split sensible; our accountancy page sets out what that partner support covers.
We're a connector, not the accountant signing your accounts — so once the company's formed, the most useful thing we do is match you with a partner accountant who runs the switch properly. If you're ready to make the move and want the admin handled from day one, speak to an expert and we'll introduce you.
Is it worth switching — and when should you stay on the umbrella?
For an outside-IR35 contractor on an ongoing assignment with a decent day rate, going limited is usually worth it: the salary-and-dividends structure means you're not paying employee-level income tax and National Insurance on every pound, and you keep what the umbrella's margin and employer's NI used to absorb. The higher and more sustained your contracting income, the more the admin step-up pays for itself.
It's not the right move for everyone. If your contracts are mostly inside IR35, the tax advantage largely evaporates — you'd carry all the company admin for little or no gain, so an umbrella (or waiting for an outside-IR35 contract) is the better call. The same applies to a short, one-off stint, or if you genuinely want zero admin and are happy to pay for that simplicity. The umbrella-to-limited switch is the move Go Limited was built around — but we'll tell a contractor stuck inside IR35 to wait, because going limited wouldn't pay off yet.
What's changing in the umbrella market in 2026?
The umbrella sector is being tightened, and it's worth knowing as context rather than cause for alarm. From 6 April 2026, responsibility for operating PAYE in umbrella supply chains moves up the chain to the recruitment agency (or, where there's no agency, the end client), under Joint and Several Liability rules (gov.uk). In practice it's HMRC closing the door on non-compliant umbrellas by making the agency liable if tax isn't deducted.
For a compliant contractor this changes little day to day — but it's a reminder that the umbrella route is under scrutiny, and another reason to be clear about whether your own company is the better long-term home for outside-IR35 contracts.
A clean break is the whole point
Switching from an umbrella to your own limited company is about taking back control of how you're paid — provided you're outside IR35 and ready for the admin that comes with it. Get the IR35 question answered first, work through the six steps in order, and put a partner accountant in place so the company runs cleanly from day one. If you'd like that introduction, speak to an expert and we'll match you with an accountant who can run the switch end to end.
Is it better to be on an umbrella or a limited company?
It depends on your IR35 status. Outside IR35, your own limited company is usually more tax-efficient because you can take a salary plus dividends rather than full PAYE. Inside IR35, the advantage largely disappears and an umbrella is often the simpler, equally tax-effective choice. Day rate, how long you'll keep contracting, and how much admin you want all feed into it.
How do I switch from umbrella to limited?
Check your IR35 status, form a company (or buy one off the shelf), open a business bank account, register for Corporation Tax and PAYE (and VAT if you'll cross £90,000 turnover), tell your agency, and appoint an accountant. The steps run in order, and most contractors are trading through their own company within a couple of weeks.
Do I need to be outside IR35 to go limited?
You can run a limited company inside IR35, but the salary-and-dividends tax advantage only applies when your contracts are outside IR35. Inside IR35, you're broadly taxed as an employee, so going limited adds admin without the tax benefit. Settle your status before you incorporate — our IR35 guide explains how it's decided.
Can I run a limited company and use an umbrella at the same time?
Yes — some contractors hold a limited company for outside-IR35 contracts and use an umbrella for inside-IR35 assignments, so each contract is handled in the most appropriate way. It adds admin, and you'll want an accountant to keep the two streams clean. Whether it's worth it depends on how often you take inside-IR35 work.
What's changing for umbrella companies in 2026?
From 6 April 2026, responsibility for operating PAYE in umbrella supply chains moves to the recruitment agency (or end client) under Joint and Several Liability rules, per gov.uk. It's aimed at non-compliant umbrellas and changes little for a compliant contractor day to day, but it signals tighter scrutiny of the umbrella route.
Switching from an umbrella company to your own limited company can lift your take-home, because a director can take a tax-efficient salary plus dividends instead of paying PAYE on everything — but it only pays off if your contracts are outside IR35, and you take on the admin that the umbrella used to handle for you. On an umbrella you're an employee, taxed under PAYE, with the employer's National Insurance and the umbrella's margin coming out of your assignment rate. Run your own company and you keep control of how you draw money, but you're now responsible for the accounts, the Corporation Tax return, the annual confirmation statement and VAT if you cross the threshold. The switch is a defined sequence: check your IR35 status, form the company (or buy one off the shelf), open a business bank account, register for the right taxes, tell your agency, and appoint an accountant. Here's how each step works — and when staying on the brolly is the smarter call.
Figures are for the 2026/27 tax year and sourced to gov.uk; they change at each Budget. General guidance, not personal advice.
Umbrella vs your own limited company — what actually changes?
The headline difference is how you're paid and who keeps what. On an umbrella you are an employee of the umbrella company, so all your earnings are taxed under PAYE — income tax and National Insurance on the lot, with no dividends available to you. The employer's National Insurance and the umbrella's margin are deducted from your assignment rate before you ever see it, which is why the umbrella's "rate" and your net pay look so different.
Run your own limited company and you become a director and shareholder. You can pay yourself a modest salary and top it up with dividends, which carry no National Insurance and — above the £500 dividend allowance — are taxed at 10.75% in the basic-rate band and 35.75% in the higher-rate band for 2026/27 (gov.uk). That salary-and-dividends mix is what makes going limited tax-efficient. The trade-off is admin: company accounts, a Corporation Tax return, the annual confirmation statement, payroll for your salary, and VAT once your turnover passes the threshold. For a fuller side-by-side, see our guide to umbrella vs limited company.
There's one condition that overrides all of this, and it's worth being blunt about: the salary-plus-dividends advantage only exists if your contracts sit outside IR35. Inside IR35, you're broadly taxed as an employee anyway, and most of the benefit disappears. So before you do anything else, settle the IR35 question — our IR35 explained for directors guide walks through how status is decided and who decides it.
Want the decision laid out before you commit to anything? Our free guide covers the umbrella-to-limited move and the tax structure behind it.
The switch is a genuine sequence — each step depends on the one before it. Done in order, most contractors are trading through their own company within a couple of weeks.
Check your IR35 status. This is the gate. If your contracts are outside IR35, going limited can be genuinely tax-efficient; if you're mostly inside, the maths usually doesn't work and you should pause here. HMRC's CEST tool gives an indication, but a proper contract review is worth getting before you incorporate.
Form the company — or buy one off the shelf. You can incorporate a new company yourself, or take an off-the-shelf (ready-made) company to start trading almost immediately. Our how to set up a limited company guide covers the formation route, the directors and shareholders, and what Companies House needs.
Open a business bank account. Your company is a separate legal entity, so its money must run through an account in the company's name — not your personal one. See does a limited company need a business bank account for why this matters and what you'll need to open one.
Register for the right taxes. Register the company for Corporation Tax, set up PAYE so you can run your own salary, and register for VAT if your turnover will exceed (or is expected to exceed) £90,000 over a rolling 12 months.
Notify your agency or end client. Tell the recruitment agency or client that you're moving from the umbrella to your own limited company. They'll need your company details to pay you correctly, and they'll re-confirm your IR35 status for the new arrangement.
Appoint an accountant. The admin you've just taken on — accounts, the Corporation Tax return, payroll, VAT — is exactly what a partner accountant handles day to day. Getting one in place from the start keeps the company compliant and your salary/dividend split sensible; our accountancy page sets out what that partner support covers.
We're a connector, not the accountant signing your accounts — so once the company's formed, the most useful thing we do is match you with a partner accountant who runs the switch properly. If you're ready to make the move and want the admin handled from day one, speak to an expert and we'll introduce you.
Is it worth switching — and when should you stay on the umbrella?
For an outside-IR35 contractor on an ongoing assignment with a decent day rate, going limited is usually worth it: the salary-and-dividends structure means you're not paying employee-level income tax and National Insurance on every pound, and you keep what the umbrella's margin and employer's NI used to absorb. The higher and more sustained your contracting income, the more the admin step-up pays for itself.
It's not the right move for everyone. If your contracts are mostly inside IR35, the tax advantage largely evaporates — you'd carry all the company admin for little or no gain, so an umbrella (or waiting for an outside-IR35 contract) is the better call. The same applies to a short, one-off stint, or if you genuinely want zero admin and are happy to pay for that simplicity. The umbrella-to-limited switch is the move Go Limited was built around — but we'll tell a contractor stuck inside IR35 to wait, because going limited wouldn't pay off yet.
What's changing in the umbrella market in 2026?
The umbrella sector is being tightened, and it's worth knowing as context rather than cause for alarm. From 6 April 2026, responsibility for operating PAYE in umbrella supply chains moves up the chain to the recruitment agency (or, where there's no agency, the end client), under Joint and Several Liability rules (gov.uk). In practice it's HMRC closing the door on non-compliant umbrellas by making the agency liable if tax isn't deducted.
For a compliant contractor this changes little day to day — but it's a reminder that the umbrella route is under scrutiny, and another reason to be clear about whether your own company is the better long-term home for outside-IR35 contracts.
A clean break is the whole point
Switching from an umbrella to your own limited company is about taking back control of how you're paid — provided you're outside IR35 and ready for the admin that comes with it. Get the IR35 question answered first, work through the six steps in order, and put a partner accountant in place so the company runs cleanly from day one. If you'd like that introduction, speak to an expert and we'll match you with an accountant who can run the switch end to end.
Is it better to be on an umbrella or a limited company?
It depends on your IR35 status. Outside IR35, your own limited company is usually more tax-efficient because you can take a salary plus dividends rather than full PAYE. Inside IR35, the advantage largely disappears and an umbrella is often the simpler, equally tax-effective choice. Day rate, how long you'll keep contracting, and how much admin you want all feed into it.
How do I switch from umbrella to limited?
Check your IR35 status, form a company (or buy one off the shelf), open a business bank account, register for Corporation Tax and PAYE (and VAT if you'll cross £90,000 turnover), tell your agency, and appoint an accountant. The steps run in order, and most contractors are trading through their own company within a couple of weeks.
Do I need to be outside IR35 to go limited?
You can run a limited company inside IR35, but the salary-and-dividends tax advantage only applies when your contracts are outside IR35. Inside IR35, you're broadly taxed as an employee, so going limited adds admin without the tax benefit. Settle your status before you incorporate — our IR35 guide explains how it's decided.
Can I run a limited company and use an umbrella at the same time?
Yes — some contractors hold a limited company for outside-IR35 contracts and use an umbrella for inside-IR35 assignments, so each contract is handled in the most appropriate way. It adds admin, and you'll want an accountant to keep the two streams clean. Whether it's worth it depends on how often you take inside-IR35 work.
What's changing for umbrella companies in 2026?
From 6 April 2026, responsibility for operating PAYE in umbrella supply chains moves to the recruitment agency (or end client) under Joint and Several Liability rules, per gov.uk. It's aimed at non-compliant umbrellas and changes little for a compliant contractor day to day, but it signals tighter scrutiny of the umbrella route.
