Before you decide, you will first need to look at each option in detail to see which best fits in with your contracting needs and lifestyle.
Let’s start by looking at what an umbrella company is and how they work.
An umbrella company employs the contractor. In turn, they are responsible for a range of tasks on the contractor’s behalf.
These include:
As we have mentioned, under an umbrella company, the contractor's pay is processed through the PAYE system. This is the most common form of taxation in the UK and is how most payroll workers pay tax.
The exception to this would be off-payroll workers, such as those that are self-employed, who pay tax through self-assessment retrospectively once they have been paid by the end client.
Find out more about how an umbrella company works in our helpful guide.
So how much tax do umbrella company contractors pay?
In line with UK tax bands, umbrella contractors will pay the following levels of tax in the financial year 2021 – 2022:
That’s how an umbrella company works and how much tax the contractor will pay under one, so what about a PAYE agency?
A PAYE agency is similar to an umbrella company in several ways.
Firstly, a PAYE agency also employs the contractor. This means that a PAYE agency will also take on tasks including invoicing the client for the contractor, collecting their fee, processing it through the PAYE system, deducting tax and National Insurance before paying the contractor the correct salary.
This means that a contractor will pay the same amounts of tax whether they choose to operate through an umbrella company or a PAYE agency.
For this reason, income shouldn’t be a deciding factor when making the decision between the two.
However, there are several significant differences between umbrella and PAYE which a contractor does need to consider.
Next, we will look in more detail at these differences.
The first big difference between umbrella and PAYE is how the contractor operates.
Under an umbrella company, the contractor has the freedom to choose which contracts they take on.
Many contractors see this as a significant benefit to working with an umbrella company as it means they get more freedom over their careers. Being able to choose what work they take on, the contractor can go for high-value contracts with their chosen clients. This means they are more in control of their career progression and development and can progress at a rate that’s best for them. It also means they can take contracts on at a time that suits them.
This is in contrast to a PAYE agency, under which a contractor is told which contracts they will work on and when. Just as it sounds, with this option, the contractor is not granted as much control over their careers and might end up working on projects that aren’t beneficial to their careers.
Another difference between PAYE and umbrella is continuity of employment.
With an umbrella company, the contractor's employment continues from contract to contract. This makes the contractor gets one easy tax code. This is very helpful when it comes to things like applying for mortgages or loans.
With a PAYE agency, however, each new contract is classified as a separate run of employment. As we have mentioned, this can be a major drawback for the contractor’s finances.
Finally, the ability to claim expenses also differs between umbrella and PAYE.
With an umbrella company, the contractor can claim work-related expenses which can be offset against their tax bill. PAYE agencies, however, don’t tend to allow this.
Now you’ve weighed up your options between PAYE and umbrella, if you’ve decided that an umbrella company sounds like the best fit for you, the next step will be to find a provider.
That’s where Umbrella Supermarket can help.
Many contractors will choose to go with an umbrella company. After all, they offer a range of benefits to the contractor, whilst allowing them to do things a PAYE agency does not, such as claim expenses, have continuity of employment and choose their own contract work.
However, there are lots of umbrella companies out there competing for your custom, so it’s important that you find the right one. After all, not all umbrella companies are created equal.
That’s where our umbrella calculator comes in handy. We let contractors input their details in order to find a list of the best-suited umbrella providers for them. Give it a go yourself today to find 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.
