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...]
As soon as you have successfully landed your first contract your recruitment agent will want to know how you would like to trade as a contractor. This is because contractors are required to have limited company status as a result of various UK and EU legislation - and you cannot be self-employed.
You will be offered a choice of two different rates for your contract. The first rate is one if you choose to work as a PAYE employee through the recruitment agency, the second rate (which will be a higher rate) is if you trade using a limited company.
Umbrella companies are an off-the-shelf ready-made limited company solution and are by far the most popular option for contractors today. Around 550,000 contractors are using an umbrella company for their contracting career, rather than managing their own limited company.
Before the 'age' of umbrella companies contractors would have contract using their own limited company. Running your own limited company is a significant, costly and time consuming administration chore.
Ever since the government introduced the IR35 law, the financial benefits of trading this way have been drastically reduced so as to make it not worthwhile.
A major benefit of using the services of an umbrella company is the higher net take home pay, even when taking into account the umbrella company's fee. The inconvenience of an umbrella company, if you can call it an inconvenience, is having to email your timesheet to the umbrella company each month.
Each contractor has their own set of individual circumstances and so needs to make their own judgment:
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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.