Are you a contractor unsure of the best way to manage your work? You’re not alone. Many freelancers and independent contractors grapple with the decision between setting up a limited company, working through agency payroll or using an umbrella company. Some of these decisions will be influenced by your IR35 status, for example a contract that falls inside IR35 it means that you cannot work through a limited company.
Here’s why becoming an umbrella employee might be the perfect fit for you
Reduced Admin Hassle
As an umbrella employee, you do not need to worry about taking care of your own national insurance contributions, or income tax as the umbrella automatically does this for you. This means you can focused on what you do best: contracting.
Pension plans
Focused can support salary sacrifice contributions into personal pension plans, which means the contractors can save £100s in PAYE and NI contributions each month whilst increasing heir pension pot.
Employee Benefits
Enjoy the perks of being an employee, such as statutory sick pay, holiday pay, and even maternity leave.
Flexibility and Continuity
Umbrella companies offer continuity of employment, which can be helpful when applying for mortgages or other financial products.
Streamlined Payments
Umbrella companies handle the invoicing from your Agency/client and ensure you receive steady payments, minus any tax deductions.
Things to consider
Limited tax relief
As an employee of an umbrella company, you may have limited opportunities to claim tax relief on expenses compared to a limited company structure. This is due to legislation brought in to make umbrella workers more inline with permanent employee’s who historically can not claim expenses on travel and subsistence.
Picking the right umbrella company
There are many great umbrella companies out there but there are still some bad apples you need to look out for. These companies may promise tax relief on travel to work expenses with no tax consequences, but remember this is dictated by HMRC, not the umbrella company. If your take home pay seems too good to be true then it usually is. You should always choose an umbrella company that works compliantly, and ideally has third party accreditations such as the FCSA.
Umbrella companies, such as Focused, can provide you with prompt, accurate and reliable payments, with great customer service to match. If your next contract falls inside IR35, then read why working through an umbrella company is most likely the best way to go.