Ok this is from memory but here it goes, someone please correct me if I’m wrong.
Setting up your own company:
There are a number of ways you can do this, Sole Trader, Partnership with someone else, LTD Company or PLC.
The two you will be interested in are Sole Trader and LTD Company.
Sole Trader would be basically "Kate trading as Magic Consulting", any debts the company runs up, if the company gets sued etc its down to you. Possibly best avoided if you’re contracting, unless your doing something simple like cutting peoples grass.
LTD Companies:
LTD Companies are very interesting to a contractor since the company is limited, it basically means you (personally) can only be sued for the number of unpaid shares you have. The company name would be something along the lines of "Magic Consulting LTD" with a LTD company however, you have to file accounts to companies house every year along with some other gubbins.
From companies house re: ltd companies…
“Private company limited by guarantee - members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. This includes all RTM (Right to Manage) companies-, commonhold associations and those community interest companies which are companies limited by guarantee.“
Setting up your own company is simple, If you fill out the forms directly via companies house it is very cheap see here
http://www.companieshouse.gov.uk/ Or alternatively if you use a registration agent it will cost between 70-150quid.
If your contracting it’s not too bad, but if your setting up your own consultancy you should be prepared (i.e. savings) to live for at least 6months with out any work, whist word gets around, you find regular clients etc.
From memory umbrella companies take a percentage of what you earn and manage all your taxes, accounts etc. But overall I believe if you manage things correctly you would be better off with your own LTD company.
Dan
Not just your garden variety geek.