Job Retention Scheme for Contractors in 2021

Can Contractors be Furloughed?

What is the Job Retention Scheme?

Employees that can no longer maintain their workforce because they have been badly impacted by the coronavirus pandemic can use the government’s Job Retention Scheme to put their employees on furlough. This is a grant that covers 80% of the employees’ monthly wage up to a maximum of £2,500 per month.

An employee can be furloughed for any amount of time and with any working pattern as long as they pay PAYE tax. A worker is eligible for furlough whether they work full-time, part-time, on a zero-hours contract or through an agency.

Are contractors eligible for the Job Retention Scheme?

The answer to whether contractors are eligible to apply for the Job Retention Scheme differ according to how you contract.

If you are a contractor working through an umbrella company, you will be eligible to receive furlough pay. This is because the umbrella company employs you and deducts your tax contributions through the PAYE system.

The umbrella company will be responsible for setting up payments to the furloughed contractor and this should be agreed between the agency and worker.

This is the case whether you contract in the public or private sector, however many public sector contractors may be required to continue working as many perform essential roles.

If you contract through a limited company and have made yourself an employee of that company, therefore paying tax through PAYE, you may also qualify for furlough pay. This should be applied for on the government’s website.

Furlough for limited company contractors

It is worth noting that although the Job Retention Scheme covers 80% of your PAYE income, dividends are not counted. This may cause significant loss of income to some limited company contractors who partially pay themselves through dividends.

What if I am a self-employed contractor?

Unfortunately, self-employed contractors that pay tax through self-assessment and not PAYE will not be eligible for the Job Retention Scheme.

What is the alternative?

If you are a self-employed contractor whose work has been badly impacted by the coronavirus pandemic there are other options out there, namely the Self-Employment Income Support Scheme.

The government has recently extended this scheme so even if you didn’t claim for the first and second grants, you can still claim for the third.

Contractors must apply online through the HMRC website and make an honest assessment about whether their business has experienced a significant reduction in profits due to the pandemic.

You must claim by the 29th January and will receive 80% of your average monthly trading profits which is paid out in a single instalment covering 3 months’ worth of profits with a limit of £7,500.

To be eligible for the Self-Employment Income Support Scheme contractors must have traded in the following tax years:

  • 2018 – 2019 – you must have submitted self-assessment for this year
  • 2019 – 2020

There are further criteria:

  • You must be currently trading
  • You have been badly impacted by the pandemic

Finally, you must declare on your application that you:

  • Intend to continue to trade
  • Believe there will be a significant reduction in your trading profits

Unfortunately, this criteria has left many self-employed workers unable to claim help.

For more information about the Self-Employment Income Support Scheme, check out the government’s guidelines on eligibility and how to apply here.

Considering joining an Umbrella Company?

Amidst the global pandemic, as well as upcoming changes to IR35 from April 6th 2021, many self-employed contractors are considering making the move to an umbrella company.

After all, an umbrella company offers contractors a level of security and support they would otherwise not receive when going it alone.

With an umbrella company, contractors are paid a salary, pay tax through the PAYE system, are entitled to statutory rights such as sick pay, and have business and admin tasks such as invoicing taken care for them. Contractors are free to work on whichever contracts they choose and when, but can be assured that they have a safety net if the unexpected should happen, as we have seen in 2020.

Working through an umbrella company also makes the contractor exempt from looming IR35 reforms which are set to badly impact the thousands of self-employed contractors out there.

Set to come into motion from 6th April this year, the changes to IR35 will mean that many limited company contractors will be caught out by the legislation and will therefore be forced to pay more in tax.

However, by working through and being employed by an umbrella company, contractors will be exempt from IR35, making life that little bit easier.

If you are considering making the move to an umbrella company, there’s never been a better time.

To find out more about umbrella vs limited and the pros and cons of each, make sure to check out our handy guide.

Let Umbrella Supermarket help you find the best umbrella company

The next step is to find the best umbrella company out there for your needs. After all, there’s plenty of choice when it comes to who you will work with, so it’s always best to do your research to find your perfect fit.

That’s where Umbrella Supermarket’s handy umbrella comparison calculator comes in handy. In just 2 minutes you can enter a few personal details and browse a list of umbrella companies best suited to your needs. Whether you are looking for more money or help with things like childcare credits, we help you cut out the noise and focus on the companies best suited to you. Why not try it for yourself?

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Using an Umbrella Calculator

The Pros of Using an Umbrella Calculator

There are many advantages to using an umbrella calculator for contractors.

Umbrella calculators allow you to quickly compare thousands of umbrella companies across the UK, offering a clear overview of what you will receive from the company, including everything from your take-home pay, what benefits you will receive, and what services the company will offer.

To help contractors find out more, Umbrella Supermarket outlines the main benefits to using an umbrella calculator in 2021.

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Umbrella vs Limited Company: What to know when making the move this new tax year

The 6th April 2021 marked significant changes to IR35 legislation which impacted thousands of self-employed, limited company contractors operating within the private sector.

In light of the changes that have now rolled out, many limited company contractors are understandably considering their options and thinking about making the move to umbrella this new tax year.

To help make the decision that little bit easier, in this guide Umbrella Supermarket outline what contractors need to know about making the move from limited company to umbrella in 2021, to help you get on the right track.

 

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Umbrella Company vs PAYE: What should you choose?

Umbrella company vs PAYE is a question asked by thousands of contractors.

After all, it’s a big decision to make that will have a direct impact on your contracting career and day-to-day life, so it’s not one that should be taken lightly.

To help every contractor make the right decision for them, Umbrella Supermarket has put together this insightful guide outlining the key differences between umbrella and PAYE and the advantages and drawbacks of each.

avoid ir35

How can I avoid IR35?

As a contractor, you will most likely know about IR35 and upcoming reforms from April 2021.

These changes to IR35 legislation are set to badly impact many self-employed contractors in the private sector, so thousands are understandably worried. After all, getting caught out by IR35 can mean you end up paying more in tax than you need at the same level as an employee, without receiving the benefits of being employed, such as statutory rights.

umbrella company costs

Umbrella Company Fees: How Much Should You Pay?

When deciding which umbrella company to work with, the fees they charge will inevitably play an important role in the decision-making process.

Umbrella company fees are taken directly out of the contractor’s income, so it is only natural that contractors want to ensure they are getting a fair deal.

To help contractors understand umbrella company fees, from how they are charged, what they will receive in return, and how much they should be paying, Umbrella Supermarket outlines everything there is to know about umbrella fees in this handy guide.

umbrella vs limited

Pros and Cons of Limited vs. Umbrella

Big reforms to IR35 legislation are set to come into motion from 6th April 2021 which will impact the thousands of self-employed, private-sector contractors out there.

For this reason, many of the contractors that currently operate through a limited company will be considering the umbrella company route as an alternative.

If this is true for you, it’s important to do your research to find out whether limited company vs umbrella is the best option for you in 2021.

To help make the decision that little bit easier, in this guide Umbrella Supermarket outline the key differences between limited vs umbrella, so you can get on the right track.

2021 budget

What Does the 2021 Budget Mean for Contractors?

On 3rd March 2021 Chancellor Rishi Sunak unveiled his Budget in the House of Commons, outlining the government’s tax and spending plans for the year ahead.

Sunak announced a variety of measures he will put into place to help businesses and jobs that have suffered through the pandemic, as well as outlining a plan for the long-term recovery of the economy.

However, the question many contractors will be asking is how the Budget will impact the

umbrella company

5 Benefits to Working with an Umbrella Company

Contracting through an umbrella company has become an increasingly popular option for contractors across the UK in recent years. After all, it is a route that offers contractors a range of benefits over other paths such as working through PAYE or being self-employed.

 

 

ir35 reforms

Contractor’s Guide to IR35 in 2021

From April 6th 2021, reforms to IR35 legislation will come into force, impacting the lives of thousands of self-employed contractors.

Inevitably, contractors across the UK are concerned about upcoming reforms and how these will affect them. To help, in this guide, Umbrella Supermarket look at what these changes to IR35 entail and how they might impact you as a contractor in 2021.

 

compare umbrella company fees

How to Compare Umbrella Company Fees

If you are considering joining an umbrella company in 2021, or have been contracting through one for a while and want to ensure you are getting a good deal, it is important that you know how to compare umbrella company fees.

What you pay in income tax and National Insurance will be the same regardless of which umbrella company you choose, however the fees the umbrella company charges can make a big difference to your take home pay.

At Umbrella Supermarket, we know that every contractor wants to get a fair deal. To help, we explain how umbrella company fees work and how you can compare them to find the best deal.