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...]
Basically, an umbrella company is an off the shelf limited company for freelance contractors who don't want to go to the bother of setting up and running their own limited company.
This is because setting up and running your own limited company can be time consuming, expensive and complex. Contrast this with the service of an umbrella company which is simple, quick and doesn't require much input from the contractor.
A contractor would normally get their contract through a recruitment agency that specialises in contract placements. The recruitment agency only wants to deal with a contractor who has 'limited company' status in order to reduce its own liabilities.
Once you join an umbrella company (registration is free) all you have to do is send the umbrella company your timesheet at the end of the week or month (dependent on what is agreed with the recruitment agency).
The umbrella company then invoices the recruitment agency, chases up and collects the payment, calculates the correct tax and National Insurance and pays the contractor directly into their own personal bank account.
Today, umbrella companies are the most popular method of getting limited company status because of government legislation called IR35. The IR35 laws are complex but essentially cover all but the very few contractors.
Contractors use an umbrella company because it is hassle free, cost effective and everything is taken care of for you. The basic role that umbrella companies provide include:
The best bit is you have no worries about IR35 and can sleep peacefully at night with no worries about the tax man knocking at your door!
All umbrella companies have to use the same PAYE calculation as defined by HMRC to work out how much tax should be paid so that element is not a factor for contractors when choosing which umbrella company to register with.
An umbrella company's main responsibility is to provide payroll solutions to its contractors. So it is vital to choose a good umbrella company that will take care of all your issues. Then you can focus on your job and leave the rest to them.
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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.