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?

Would you like more information on Complete Guide to Contractor Options?

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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.

umbrellas

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.

 

Choose Between PAYE or Umbrella

How to Choose Between PAYE or Umbrella

Every contractor faces the decision between PAYE or umbrella, but how do you know which is the best option for you?

After all, PAYE and umbrella both have key differences, meaning contractors should do their research to find the best path for them.

Thankfully, Umbrella Supermarket is here to help. In this guide, we take a look at PAYE vs. umbrella, explaining what you should know before making the all-important decision.

date rates vs hourly rates

Should contractors choose hourly or daily rates?

There are many decisions a contractor must make in their career. One important one is whether to charge daily rates or hourly rates.

Each option has its own pros and cons and will have a different impact on contractors.

Therefore, it’s important that every contractor does their research to find out which option is best for them.

In this guide, Umbrella Supermarket looks at hourly rate vs daily rate and the benefits and drawbacks of each, to help every contractor find the best route forward for them.

 

public sector private sector contractors

How to choose between public sector vs. private sector for contractors

Every contractor must make the decision about whether to work in the public sector vs private sector.

Operating in the public or private sector can have a big impact on the contractor’s career, including on what types of contracts they will work on, who they will work with to whether they will fall under IR35.

This is especially true since changes to IR35 legislation were rolled out in April this year which have had a significant impact on private sector contractors.

If you are debating between contracting in the public sector vs private sector, Umbrella Supermarket are here to help. In this guide, we outline the key differences between the public and private sectors and what effects this will have on contractors.

Statutory payments

Statutory payments for contractors explained

Contractors can choose to work on a self-employed basis through their own limited company, or through an umbrella company as an employee of the provider.

Thousands of contractors choose the umbrella route. After all, there is a range of benefits to operating under an umbrella company, including receiving statutory rights.

If you are considering becoming an umbrella contractor in 2021 and want to know more about statutory payments for umbrella contractors, Umbrella Supermarket has put together this handy guide outlining everything there is to know.

comparing umbrella companies

What To Look Out For When Comparing Umbrella Companies

Working through an umbrella company has become an increasingly popular option for contractors in the UK.

An umbrella company makes contracting easy and hassle-free for contractors, saving them headaches on everything from tax, payroll, insurance to dreaded IR35.

However, with are so many umbrella companies out there, choosing the perfect one for you is no easy task.

To help, Umbrella Supermarket have put together this handy on what to consider when comparing umbrella companies, so you can find the best one in 2021.

umbrella company

How Does an Umbrella Company Work?

In light of recent IR35 reforms that came into force in April 2021, many limited company contractors are now thinking about making the move to Umbrella.

However, understandably, many will want to know more about umbrella companies and how they work before taking the leap.

To help these contractors decide whether Umbrella is the best move for them, Umbrella Supermarket have put together this ultimate guide on everything there is to know about umbrella companies in 2021.