During the current COVID-19 pandemic, although many industries are facing hardships and difficulties, some sectors are experiencing growth and a strong demand for more, short-term workers and skill-sets. This is great news for contractors who are pros at short-term, skilled project work.
Whether you are a seasoned contractor or are now considering contracting as a way forward, every contractor wants to know what the best, most cost-effective route forward is – whether that’s working through PAYE or umbrella.
To help contractors carve the best path forward, Umbrella Supermarket explain exactly how the PAYE and umbrella routes differ and sum up the pros and cons of both to help every contractor choose the best, most cost and time effective contracting option for them.
PAYE simply stands for pay-as-you-earn - referring to the standard form of income tax in the UK. Under the PAYE system, tax and National Insurance contributions are taken from a contractor’s salary before it is paid to them. You will likely be aware of this method of taxation as the most common in the UK, with most employees paying tax this way.
If contractors choose this route, the PAYE agency becomes responsible for finding and securing their work and paying their salary through the PAYE tax system.
The contractor will pay tax in line with current PAYE rates based on the following tax bands:
When choosing between PAYE and Umbrella, many contractors understandably face confusion. After all, technically umbrella companies do not differ from PAYE. An umbrella company also acts as the contractor’s employer, putting the contractor on their payroll, processing their income and paying tax and National Insurance contributions on their behalf through the PAYE tax system.
So, what is the difference between PAYE and umbrella?
The main difference is that, unlike a PAYE agency who employs the contractor and finds their contract work for them, an umbrella company gives the contractor greater freedom to choose what contracts they work on and when.
The umbrella company still employs the contractor and pays their salary through the PAYE tax system, but they allow contractors more flexibility to decide what work they take on.
There is a third and final option – to operate under a limited company and pay tax and National Insurance contributions on a self-assessment basis.
Contractors that choose to set up and work under their own limited company will pay the same tax rates - their tax contributions are just paid differently. Unlike the PAYE system under which contractor’s tax contributions are deducted from their income as they earn, self-assessment contractors are paid a pre-tax amount and are then required to work out and pay their tax contributions for a specific time period – this can be monthly, quarterly or annually.
Now you have a clear picture of your options, you can choose the best route forward to suit your contracting needs. This means weighing up what best works for you.
When looking for the most cost effective option between PAYE and umbrella, it’s important to note that you will pay the same amount of tax whichever option you choose since your pay is processed through the PAYE system with both options. As neither option is more or less cost-effective, this shouldn’t impact a contractor’s decision.
What contractors should look at when it comes to PAYE vs umbrella, is how much freedom they want over choosing contracts to work on:
For contractors that choose the umbrella company route, it’s now time to find the best umbrella company for your needs. That’s where Umbrella Supermarket’s award winning Umbrella Company Comparison Tool comes in handy. Our tool lets you compare the best umbrella companies online in just 2 minutes. We don’t take your details and say we’ll call you back later, we give you real results instantly, letting you get on with finding the best umbrella company for you.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
