Should you choose agency PAYE contracting over umbrella contracting? Have more questions on PAYE vs Umbrella? Talk to the team at Umbrella Supermarket today.
You’re certainly not alone in facing that decision – there are hundreds of thousands of contractors who choose not to take the limited company route because of the paperwork, the administration, and the need to interact on a regular basis with HMRC or simply IR35. You may have heard of umbrella companies but you may not have heard of agency PAYE – what are they and which one is right for you?
With both approaches, you become an employee of an organisation and that organisation then pays your taxes, engages with HMRC on your behalf, and completes all the necessary administration tasks connected with employment. You will earn your money under the pay-as-you-earn, Real Time Information system as either an umbrella contractor or a PAYE contractor – you personally will not need to complete a self-assessment form (except under certain circumstances).
Agency PAYE rates are more likely to be offered by recruitment agencies, whereas umbrella companies are generally accepted by both the end client and the agency.
In the event you are offered both options you will be quoted two rates – the PAYE rate and the umbrella rate. The umbrella rate is higher to take account of the fact that this arrangement includes general employer outgoings and the umbrella company’s profit margin. Regardless of which option you take, the amount of money you actually take home will be roughly similar to each other in most cases.
In this article umbrellasupermarket.co.uk will examine the subtle differences between the two options.
Both agency PAYE contractors and umbrella company contractors are required to submit timesheets at the end of a given period so that their client can be invoiced for payment. Umbrella company contractors have slightly more paperwork than an agency PAYE contractor because you will probably need to submit a timesheet to both the agency and the umbrella.
Agency PAYE arrangements can be attractive for lower-paid temporary singular contracts but if your goal is to work on a number of assignments (organised by different recruitment agencies) at once then an umbrella company is the best way forward.
This is because you will pay a higher rate of tax on your second employment, so it’s best to keep just one employer for multiple contracts in order to pay less tax.
Alternatively you may wish to work temporarily on a contract before returning to full-time permanent employment. In these cases, agency PAYE is likely to be the better option as you will likely keep more money from your labour.
As an employee of an umbrella or your agency you will be entitled to statutory benefits and a pension.
You should also be able to claim back expenses incurred in the course of fulfilling the contract, however this will need to be checked on a company by company basis.
To differentiate themselves from agency PAYE, some umbrella companies now go further than these benefits by offering perks such as free cinema tickets, coffee and retail discounts. If you use these benefits regularly then the financial savings they offer can make a real difference to your after tax expenditure. This means that while you might take home the same after tax using agency PAYE or an umbrella company, with the umbrella you could be left with more in the bank at the end of the month.
Most contractors are advised to take out insurance prior to beginning work for a client – in fact, for many clients, having adequate insurance is a pre-requisite to being short-listed for the work. Recruitment agencies and umbrella companies will often provide you with the cover you need to start work on a contract. The competition between umbrella companies has led to many of them offering impressive levels of accident cover, life cover, and health insurance at no extra cost to their contractors.
Umbrella companies are much more likely to provide contractor-centred human resources support to their contractors if they need help in a work situation or if they need to raise a grievance – remember that they receive their income from you and not your client. The situation is different with agency PAYE arrangements because their customer is, in fact, the client. Some recruitment agencies may not be able or willing to provide you with support because they don’t have the infrastructure to do it and/or because they might be worried that they will lose their client’s business.
It’s important to note that an agency will be taking a proportion of your day rate before you get paid as their fee for maintaining your contract. In the longer term you might wish to break away from your agency in order to take home a higher day rate, but if your agency is also your employer it might prove more difficult to do so.
It’s always better to get advice on whether the umbrella contractor or agency PAYE contractor route is better for you. In most cases, accountants will recommend an umbrella contractor arrangement because of the additional perks that agencies will offer to tempt you to start working with them. Don’t forget that you can claim back limited expenses as an umbrella contractor too which may mean you take home more pay than you would have done otherwise. It’s good to ask an expert to run a personalised calculation on your behalf before making a decision.
If you decide or if you are advised that the umbrella contractor route is the right one for you, how do you find the best umbrella company to suit your personal, financial, and professional goals? The answer is to start your search through Umbrella Supermarket.
To start your search, please click here.
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.
