Contractors can discover thatan umbrella company is a great solution for managing clients and their money. They can ensure you’re not breaking regulations andgive you the security of being an employee without the trouble of setting up a limited company. If you’re considering using an umbrella company,you must make sure thatyou do things and understand how to get the most out of using the company. There are a few different things to consider if you want to get the benefit of an umbrella company.
Make Certain an Umbrella Company Is Perfect for You
Before using an umbrella company,you must make sure that it’s the right choice for you. It’s not necessarily suitable for all contractors,so you need to evaluate the pros and cons of using one. An umbrella company permits you to avoid the need to set up your own company. The umbrella company will raise invoices for you and pay you through PAYE, as you pay them a fee. It helps you to avoid issues around IR35 and simplifies things like accounting and taxes for you. You may pay to a pension and get insurance through an umbrella company.
Know the Law Surrounding Umbrella Companies
If you’re going to use an umbrella company,it’s a good idea. Firstly,an umbrella company needs to pay their contractors the national minimum wage. They can’t pay below that and make up the difference with expenses. Umbrella companies provide the protections that an employer does,and you should have a full employment contract with them. You get the advantages of sick pay,vacation pay and other protections that you wouldn’t have as a plain contractor or self-employed individual.
Claiming Expenses with an Umbrella Company
Expenses can find a little complicated when you use an umbrella company. You can have expenses paid to you by the company free of income tax and National Insurance contributions,but they need to only be repayment of real expenditure which you have incurred while doing your work. Travel expenses to and from your workplace aren’t included because this is viewed as commuting,as a full-time employee would do. HMRC decided that under Supervision,Control or Management,contractors can’t claim tax relief.
Umbrella Companies and Holiday Pay
As you are treated like an employee by the umbrella company,you are entitled to holiday pay. Typically,it is going to be exercised in 12.07% of your hourly rate. Umbrella companies will hold your vacation pay until you take time off,you complete a contract of employment or the tax year ends. Sometimes you might get vacation pay each month or week.
Paying Tax with Umbrella Companies
You’re taxed through PAYE when you use an umbrella company. They will send you a P60 at the end of the year and can do any tax tasks for you. When you choose a company,check what is included in their charges.
If you want to use an umbrella company,ensure you understand how everything works. It could be a good option for you as a contractor.