Complete Guide to Contractor Options

Is umbrella company contracting the same as self-employed? Contractor options explained


Is umbrella company contracting the same as self-employed?

No – umbrella company contracting is not the same as self-employed contracting.

To understand the differences between each and how this will impact you as a

contractor, we will firstly look at what an umbrella company is.

What is an umbrella company?

An umbrella company employs the contractor, meaning they do not operate on a

self employed basis.

Although the contractor is employed by the umbrella company, they still enjoy the freedom

to choose which contracts they work on, when and with which clients. Umbrella contractors

also receive a range of benefits that come with being employed.

For one, the umbrella company pays the contractor a salary, meaning their tax contributions and National Insurance deductions are worked out through the PAYE system and taken from their salary before it is paid to them. This means they do not have to deal with filing for self-assessment which can often be tricky and time consuming.

What’s more, umbrella contractors qualify for statutory rights. This includes holiday pay, sick pay, maternity and paternity leave and a workplace pension. So, if the contractor wishes to take a break or unexpectedly fall ill, they can rest assured that they will still receive an income.

The umbrella company also takes care of business tasks associated with contracting on behalf of the contractor. This includes tasks such as processing expenses, invoicing the client, chasing late payments and other paperwork and admin tasks.

Finally, the umbrella route is typically considered the easiest way of contracting. After all, they take care of the tricky tasks whilst leaving the contractor free to progress with their contracting career.

In exchange for these benefits, the contractor must pay the umbrella company a fee.

Although this is an additional cost, it is worth noting that umbrella company fees are a legitimate expense in the eyes of HMRC and can therefore be deducted from the contractor’s salary before it is processed for tax.

The other option is to go it alone by operating as a self-employed contractor.

What is a self-employed contractor?

Self-employed contractors must set up and operate through their own limited company.

In this case, the contractor themselves has to find and secure their own work, negotiate a fee, file for self-assessment and work out their tax and National Insurance contributions.

Here, the contractor has 100% freedom over their finances and career, however, it is worth noting that self-assessment can be tough and take a lot of time. Therefore, most limited company contractors opt to use the services of an accountant to help make things easier. What’s more, the contractor must hold back a portion of their fee in order to cover tax and National Insurance costs, which requires a strong level of planning.

What’s more, the self-employed contractor is also responsible for running their own limited company. This means they have to deal with the admin and paperwork side of running a business which again, can take the contractor’s time and energy.

Self-employed contractors are not entitled to statutory benefits that umbrella contractors are. So, they will need to budget for holidays or in case they fall ill and need to take time off work. They will have to cover these costs out of their own pockets.

The final consideration about choosing the self-employed contractor route is IR35.

IR35 is a piece of legislation that was introduced to stop contractors from claiming to be self-employed and enjoying tax benefits, yet working more like employees.

In 2017, reforms were introduced which made it the responsibility of the client and not the contractor to determine the contractor’s IR35 status within public sector contracts, leading to thousands being wrongly classified. This meant that these contractors ended up paying more in tax and National Insurance at the same levels as employees, without receiving the benefits that employees do.

This was extended to the private sector in April of this year, badly impacting thousands of limited company contractors and leading many to instead consider going umbrella.

After all, umbrella company contractors are automatically exempt from IR35. This means no stress and worry about getting caught out by IR35 or becoming subject to worrisome, lengthy and expensive IR35 investigations.

So, if you think it’s now the right time to make the move to umbrella, we can help you find the right umbrella company for you.

Let Umbrella Supermarket help

Once you’ve decided to go umbrella, the next step is to find an umbrella company that’s the perfect fit for you.

After all, no two contractors are the same, meaning it’s important to find a provider that works for you.

Simply head over to our umbrella calculator, enter a few key details such as your contractor daily rate and preferences, and we will generate a list of the best-suited companies for you.

We will even show you what your payslip will look like under each umbrella company, what benefits and services you will receive and how much you will pay in fees to the company.

If you’re ready to see how we can help you find your perfect match today why not try it out for yourself?

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Decision Making

Is PAYE Better Than Umbrella?

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.

using an umbrella company

Why Should Contractors use an Umbrella Company?

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.


umbrella company fees

Does an Umbrella Company Charge Fees?

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.


What makes a good umbrella company

What Makes a Good Umbrella Company?

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.

umbrella company pensions

Guide to Umbrella Company Pensions

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.


using an umbrella company

Beginner’s Guide to Using an Umbrella Company

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 and Umbrella

Guide to PAYE vs. Umbrella

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.

Holiday Pay for Umbrella Contractors

Complete Guide to Holiday Pay for Umbrella Contractors

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.

umbrella company

When Shouldn’t You Use an Umbrella Company?

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.


The truth about HMRC approved Umbrella Companies

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.

umbrella company costs

How Much are Umbrella Company Costs?

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.