Best advice for using an umbrella company
Contractors can discover thatan umbrella company is a solution for managing their money and customers. They can ensure you’re not breaking regulations andgive you the protection of becoming an employee without the trouble of setting up a limited company. If you’re thinking about using an umbrella company,you should be certain thatyou do things and understand how to get the most from using the company. There are a few different things to consider if you would like to get the advantage of an umbrella company.
Make Sure an Umbrella Company Is Right for You
Before using an umbrella company,you should make certain that it’s the right choice for you. It’s not necessarily acceptable for all contractors,so you need to evaluate the advantages and disadvantages of using one. An umbrella company permits you to avoid the need to prepare your own company. The umbrella company will raise invoices for you and pay you while you pay them a fee. It helps you to prevent problems around IR35 and simplifies things like bookkeeping and taxes for you. You may also pay into a retirement and receive insurance through an umbrella company.
Know the Law Surrounding Umbrella Companies
If you are going to use an umbrella company,it is a good idea. An umbrella company needs to pay their contractors the national minimum wage. They make up the gap with expenses and can’t pay below that. Umbrella companies offer the protections that an employer does,and you should have a employment contract together. You get the benefits of holiday pay sick pay and other protections that you wouldn’t have as a plain 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 real expenditure which you have incurred while doing your work. Travel expenses to and from your office are not included because this is viewed as normal commuting,as a fulltime employee would do. HMRC decided that under Supervision,Control or Management,contractors can’t claim tax relief.
Umbrella Companies and Holiday Pay
As you’re treated like an employee by the umbrella company,you’re eligible for holiday pay. Typically,it will be exercised at 12.07% of your hourly rate. Until you take off time umbrella companies will hold your holiday pay,you finish a contract of employment or the tax year ends. Sometimes you might get holiday pay each week or month.
Paying Tax with Umbrella Companies
You’re 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 also. When you opt for a company,check what’s included in their charges.
If you would like to use an umbrella company,ensure that you understand how everything works. It could be a good choice for you as a contractor.