Contractors can find an umbrella company is a great solution for managing customers and their money. They can make certain you’re not breaking regulations andgive you the protection of being an employee without the hassle of setting up a limited company. If you’re thinking about using an umbrella company,you must be sure you do things properly and know how to get the most from using the company. There are a few different things to take into account if you would like to get the advantage of an umbrella company.
Make Certain an Umbrella Company Is Perfect for You
Before using an umbrella company,you must make sure that it’s the right selection for you. It’s not necessarily acceptable for all contractors,so you want to assess the advantages and disadvantages of using one. An umbrella company permits you to avoid the need to set up your own company. The umbrella company will raise invoices for you and pay you while you pay them a fee. It helps you to avoid issues around IR35 and simplifies things like accounting and taxes for you. You can also pay into a shared retirement and receive insurance through an umbrella company.
Know the Law Surrounding Umbrella Companies
If you’re going to use an umbrella company,it is a fantastic idea. An umbrella company needs to pay their contractors the national minimum wage. They then make up the difference with expenses and can’t pay below that. Umbrella companies also provide the protections that an employer does,and you should have a employment contract together. You get the benefits of vacation pay,statutory sick pay and protections that you wouldn’t have as a contractor or individual.
Claiming Expenses with an Umbrella Company
Expenses can get a little complicated when you use an umbrella company. You can have expenses paid to you by the company free of income tax and National Insurance contributions,but they will need to only be repayment of expenditure that you have incurred while doing your work. Travel expenses to and from your office are not included because this is seen as normal commuting,as a fulltime employee would do. HMRC decided that under Supervision,Direction or Control,contractors can’t claim tax relief.
Umbrella Companies and Holiday Pay
As you are treated like an employee by the umbrella company,you are eligible for holiday pay. Typically,it will be worked out in 12.07% of your hourly rate. Until you take off time umbrella companies will hold your vacation pay,you finish a contract of employment or the tax year ends. You might get vacation pay each week or month.
Paying Tax with Umbrella Companies
You are taxed through PAYE when you use an umbrella company. They will send you a P60 at the end of the year and can do any tax tasks for you too. When you opt for a company,check what is included in their fees.
If you would like to use an umbrella company,ensure that you understand how everything works first. It could be a fantastic option for you as a contractor.