If you're working as a freelance or agency chef, you’ve probably heard terms like limited company, PAYE, and umbrella company. But what do they actually mean, and which is right for you?
Following our recent post “Why Chefs Should Consider Becoming a Limited Company”, here’s a breakdown of how each option works and what chefs should consider when choosing a structure.
1. Limited company
As explored in the recent post, “Why Chefs Should Consider Becoming a Limited Company”, running your own limited company means you are both the director and employee of a separate legal business. You invoice directly, pay yourself through a mix of salary and dividends, and manage your own tax affairs.
2. PAYE
With PAYE (Pay As You Earn), you’re employed directly by a staffing agency or the end client. Tax and National Insurance are deducted at source, and you receive a regular payslip.
3. Umbrella Company
An umbrella company acts as your employer. You submit timesheets, they invoice the client or agency, deduct tax and National Insurance, and then pay you a salary. When you register with an umbrella company, you’re also paying for their service.
Be cautious when signing up to an umbrella company because in addition to your own deductions, you may also be covering the employer’s National Insurance contributions. Always check carefully for any hidden costs or extra charges before signing up.
Which is right for you?
There’s no one-size-fits-all answer. It depends on your income, how often you work, your appetite for admin, and whether your work is inside or outside IR35.
Many chefs start on PAYE or umbrella when they’re new to freelancing, then move to a limited company once they’ve built up their reputation. If you regularly take on outside-IR35 contracts, a limited company could give you more flexibility and higher take-home pay.
Need help deciding?
At Bookachef, we can help connect you with accountants and advisers who understand the unique world of freelance cheffing.
Whether you’re a seasoned pro or just starting out, getting your setup right can make a huge difference to your income, flexibility, and peace of mind.
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