Let’s start by looking at contracting through a limited company.
Here, the contractor is self-employed and must set up their own limited company.
They will be required to find and secure their own contract work, negotiate a fee, hold enough back from what they are paid to cover tax and National Insurance contributions and pay this through self-assessment.
Self-assessment can be tricky and time-consuming, so many limited company contractors opt to use the service of an accountant to help make the task easier. However, it is worth bearing in mind that this is an additional cost to account for.
As well as taking care of their own finances, self-employed contractors are also responsible for setting up and running their own business and must take on all tasks associated with this, from admin, paperwork to invoicing. Again, it is worth considering that this can take up a contractor’s precious time and energy.
Finally, self-employed contractors do not receive statutory rights including sick pay, paid holiday leave, maternity or paternity leave and a workplace pension. This means that the contractor should again budget for this as they will have to cover the costs should they unexpectedly fall ill or wish to take a holiday.
There is also another factor to take into consideration, IR35.
When debating between limited company vs umbrella, another factor to account for is IR35.
IR35 legislation was introduced in 2007 to stop self-employed workers such as contractors from operating as employees but enjoying the tax and National Insurance benefits of being self-employed. In other words, it is designed to stop ‘disguised employees.’
Further reforms were put into action in 2017 which made it the responsibility of the client and not the contractor to determine the contractor’s IR35 status in the public sector.
This meant that thousands of contractors were wrongly classified under the legislation and had to pay more in PAYE tax contributions than they needed to. These contractors were effectively paying tax as employees without receiving any of the benefits an employee would such as statutory rights.
From April 6th 2021, these changes will also be rolled out to the private sector, impacting thousands of private sector self-employed contractors.
This will result in many of these contractors paying more in tax, and can lead to stressful and often expensive IR35 investigations if red flags are raised to HMRC over your IR35 status.
What’s more, many larger clients have said they will stop using the services of limited company contractors altogether to avoid getting caught up in IR35.
Clearly, this is a major drawback of the limited company route and has led many self-employed contractors to consider an alternative route – an umbrella company.
Umbrella companies are widely considered an easy, hassle-free way of contracting and what’s more, they mean the contractor is completely exempt from IR35, taking away the stress and hassle of getting caught out by the legislation.
An umbrella company will employ the contractor, meaning although they still have the freedom to choose which contracts they work on and when, they also receive employee benefits.
The umbrella company pays the contractor a salary, meaning tax contributions are worked out and deducted on their behalf through the PAYE system, taking away the need for the contractor to undertake any tricky tax calculations themselves.
The umbrella company will also process the contractor’s invoices on their behalf, take care of admin and paperwork and give them statutory benefits. To find out more, check out our handy guide to umbrella sick pay and other statutory rights.
In exchange for these services, the contractor will pay the umbrella company a fee.
This might be an additional cost out of the contractor’s pocket, however it is worth noting that umbrella company fees are deemed a legitimate business expense by HMRC and can therefore be deducted from their salary before it is processed for tax.
Many contractors favour the umbrella company route as an easier way to contract. After all, the umbrella company offers the contractor the freedom and flexibility of being a self-employed contractor coupled with the security and benefits of being an employee.
What’s more, as an employee of the umbrella company, the contractor does not need to worry about getting caught out by IR35 which will be a huge sigh of relief for many.
If you have decided that going umbrella is the best way forward for your contracting career in 2021, Umbrella Supermarket are here to help you find the best umbrella company for your needs.
By simply entering a few key details, such as your name, contractor rate and preferences, our umbrella calculator will generate a list of the best-suited umbrella companies for your needs.
We will show you what services and benefits you will receive from each company, how much you will pay in fees to the company, what your take home pay will be, how much you will pay in tax and any additional benefits open to you, so you can see if this is the better option over working through a limited company.
Ready to see what our umbrella calculator can do for you today?
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.
