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...]
Contractor? Freelancer? Temporary Worker?
There are many different terms for those individuals who work on a series of short-term contracts as opposed to being a full time employee of one company.
Being a good contractor is only part of the requirement for sustainable success as a contractor - you also have to manage your back-office. A back-office:
The good news is biros have replaced quills, the jet engines have replaced propellers and emails have replaced telexes. Welcome to your introduction to the fast food of accounting - the umbrella company.
"An umbrella company deals with all these administrative burdens and the energy draining nature of paperwork.
"Umbrella companies are specifically designed for professional contractors who may be great at their own profession but bloody useless at Company Law and the minutia of administration.
"If you've decided to be a professional contractor you have two choices as regards the running of your business
"There are advantages of running your own limited company, but an umbrella company is cheaper, more efficient and has a lot less paperwork. A no brainer for most contractors."
Running your own company means you have to keep records, be responsible for invoicing, maintaining all your expense records, be on top of any laws that affect you.
The only thing you need to concern yourself with is making sure that your chosen umbrella company has your time sheet each week/month.
"Running your own limited company means you have to worry about the intricate tax codes, set money aside for taxes, track your allowable business expenses, and complete monthly and quarterly government returns - and that's just for starters!
"Your umbrella company handles the details of contracts, invoicing, credit control, ensures that your correct taxes are paid, and generally takes care of every aspect of administration that keeps you legal as a contractor.
"When you trade through an umbrella company you take advantage of their expertise in tax management. Don't worry about what you can, and cannot, do. Experts are on hand to tell you what is legal and what isn't.
"So, in summary, a contractor gets all the advantages of a limited company without all the related paperwork."
There are pros and cons to both umbrella companies and running your own limited company. Your specific situation can help you with the correct choice.
If you don't like managing administration an umbrella company will take that worry off your mind.
If you're ok with detailed paperwork then running your own limited company may be a good choice. If you would prefer to avoid all that hassle then find an umbrella company.
Unsure whether to run your own limited company or use an umbrella company?
If you don't know which option is best for you then it may make sense to register and work through an umbrella company, at least for the first 12 months.
It's easier to leave an umbrella company and then start your own limited company, than do it the other way round.
If you work through an umbrella company you can claim business expenses and have no paperwork, but you won't be a director. If need to be a director then running a limited company is the better option.
Are you ready to go umbrella? Use our umbrella company comparison calculator and compare prices, reviews and view a personal take home pay example.
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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.