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How do I move from an umbrella company to my own limited company?

Moving from an umbrella to a limited company structure is not too different from the process of moving into contracting from being a traditional PAYE employee (a “permie”). Once you have decided to make the switch from being an umbrella company employee to setting up your own limited company, there are a number of steps you need to make to finalise the move.

You will, first of all, need to inform your umbrella company that you would like to leave, and they should then prepare a final calculation for you, and pay any outstanding salary and expenses. You should also receive a P45. In some cases, you may need to provide a certain period of notice to your umbrella, but this is not often the case.

Via a contractor accountant (preferably a contractor specialist), you can then begin process of setting up your new limited company, and becoming the director and employee of your own company.

Although it is not always the case, most of the time it will be far easier to make the move in-between contract renewals, as any current contract will have been signed between your umbrella company and the recruitment agency, or client. If you make the switch mid-contract, your contract will need to be revised to show the new relationship between your limited company and the agency/client.

Switching between an umbrella and a limited company should be a fairly straightforward process, and a good accountant will be able to ease the transition for you.

This FAQ was kindly answered by David Houston, MD of the Houston Partnership.

Last updated: 1st November 2017