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How do I switch from an umbrella company to a limited company?

Published on Sep 23, 2009 |

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If you have decided to move from your umbrella company and start contracting via your own limited company, there are a number of steps you will need to take to ensure this changeover goes smoothly.

Your decision to switch company structure could be for a number of reasons. We have covered the limited or umbrella? question in a dedicated article on the site.

In theory, the switching process should not be complicated. After you have given notice to your umbrella company, your umbrella should reimburse you for any salary and expenses you are owed. Your umbrella company should also issue you with your P45 as you will soon join the payroll of your new limited company.

You can concurrently set up your new limited company, and hire the services of a contractor accountant.

Timing your switch

However, complications may arise if you decide to switch business structures mid-contract.

If you switch mid-contract, new contracts will need to be signed between you and your new limited company and your recruitment agent (or end client). This should not prove to be a problem, but both your old umbrella company and your agent (or end client) will need to agree to this. If you are working direct, you may need to explain the situation to your client.

You should also check the terms and conditions of your current umbrella company service, as there may be penalties, or a notice period.

Further Information

Most importantly, you should first read our guide to choosing between an umbrella company or limited company before switching business structures, as there are a number of considerations to take on-board before changing.

If you have decided to move structure, try our guide to setting up a contractor limited company, and our tips on how to choose a good contractor accountant.