To help every contractor navigate the sometimes confusing world of IR35, in this guide, Umbrella Supermarket outlines the differences between the public and private sectors and how this will determine whether you will be impacted by IR35.
Whereas the public sector lies under the control of government, the private sector is run by individuals and businesses who make a profit. This leads to several key differences between the two sectors, including:
The public sector’s objectives and motivations are influenced and directed by compulsory regulations, whether that be from local, regional or national bodies and organisations.
However, private sector organisations are not subject to such restrictions. This means that these organisations have the freedom to set their own objectives and motivations. As the private sector consists of individuals and companies, this usually means that their goals are financial and revenue-centric.
Another main difference between the public and private sector is their spending. As we have mentioned, as the public sector is accountable to several parties that are interested in how they are spending their money and performing, however the private sector isn’t subject to such restrictions. This means the private sector is largely free it spend its money as it wishes.
Finally, the two sectors differ in how transparent they are expected to be. After all, as public sector organisations are under the control of government, being open and transparent is of the utmost importance. These organisations must share key information on what they are doing and achieving when asked to disclose it.
Again, however, private sector bodies are not subject to such strict standards. As private businesses and organisations, they can often hold back information if and when they wish.
Those are the main differences between the public and private sectors, so what impact does this have on contractors?
When it comes to the public and private sectors, the main difference that can have a big impact on contractors is how they will be impacted by IR35.
IR35 legislation initially came into play in 2000. It was introduced to stop workers like contractors operating as ‘disguised employees.’ In other words, it was designed to stop workers offering their services in a way which allowed them to avoid paying tax and National Insurance.
Under the legislation, it was the responsibility of the contractor themselves to establish their own IR35 status.
However, this changed when HMRC deemed that too many companies were not compliant. As of 2017, in the public sector, it became the responsibility of the client to determine the contractor’s IR35 status.
When this change was rolled out to the public sector, it meant that many contractors were deemed to be inside of IR35, regardless of their actual circumstances.
This meant that it became the client’s responsibility to deduct the contractor’s tax and National Insurance contributions from their fee before it was paid to them.
The problem here was that public-sector clients weren’t always accurate in their assessments. This led to many contractors paying more in PAYE tax and National Insurance Contributions than they needed to, having a damaging knock on effect to thousands of contractors.
Although IR35 originally only applied to the public sector, as of April 2021, it is set to be rolled out to the private sector too. Although this was originally meant to come into play in April 2020, it has since been delayed due to the COVID-19 pandemic.
From this point onwards, it will become the responsibility of the client to determine the contractor’s IR35 status, meaning many of the 170,000 limited company contractors are set to be badly impacted.
So, although contractors can currently avoid IR35 by working in the private sector, as of April next year this will no longer be the case.
Inevitably, many contractors that currently work in the private sector are feeling anxious about these changes. After all, it may mean they end up paying more in tax and National Insurance than they need to. What’s more, many larger clients have stated that they will simply stop using the services of limited company contractors altogether.
If you are in a similar boat, there is a way to ensure compliance with IR35 – by working through an umbrella company.
An umbrella company makes the contractor their employee, in turn putting them on their payroll, processing their salary and tax through PAYE and giving them statutory benefits such as holiday pay and sick leave.
As well as offering the contractor these range of benefits, they also have the key advantage of making the contractor exempt to IR35 since they are technically an employee.
Contracting through an umbrella company has become an increasingly popular way for contractors to operate, combining the benefits and security of employment with the freedom and flexibility of being self-employed.
What’s more, as changes to IR35 prepare to come into motion from next year in the private sector, there’s never been a better time to consider working through an umbrella company.
If you have decided this is the right path for you, the next step is to find the best umbrella company for you.
That’s where our umbrella calculator comes in handy. In just 2 minutes, we help you find the best umbrella company based on your needs and requirements. So, whether you are looking for more money or help with things like childcare credits, we are here to help.
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.
