Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.
Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.
Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.
The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]
IR35 is Government legislation (Finance Act 2000), with the aim of stopping contractors avoiding tax they should be paying. At one point in time employees would quit their full time job on a Friday - returning the following Monday as a contractor to do exactly the same job but paying far less tax!
It was great for the contractors and legal at the time, but HMRC felt it was an unfair way of avoiding tax so changed the law for all contractors, by introducing the IR35 legislation.
This meant that contractors had to pay more tax and NIC than previously. If you're doing the same job as a full-time employee of your client then HMRC may accuse you of 'disguised employment'.
You can see if you fall Inside or Outside of IR35 using the IR35 Status Calculator
You should still go about comparing an umbrella company service to managing your own limited company, because there are still advantages of running your own limited company.
The advantages of using an umbrella company service often out-weigh all the options. If you are unsure what to do see our introduction to an umbrella company and our guide on how to find the best umbrella company.
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It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.
Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].
Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.