Contractors can find an umbrella company is a solution for managing their money and clients. They can ensure you’re not breaking regulations andgive you the protection of being an employee without the trouble of setting up a limited company. If you’re considering using an umbrella company,you should make certain you do things and understand how to get the most from using the company. There are a few unique things to consider if you want to get the advantage of an umbrella company.
Make Sure an Umbrella Company Is
Before using an umbrella company,you should make certain that it’s the ideal selection for you. It’s not suitable for all contractors,which means you need to evaluate the pros and cons 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 cover you while you pay them a fee. It enables you to prevent problems around IR35 and simplifies things like accounting and taxes for you. You may also pay into a pension 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 to know a few of the laws they have to follow. Primarily,an umbrella company needs to pay their contractors the minimum wage. They can’t cover below that and then make up the difference with expenses. Umbrella companies provide the protections that an employer does,and you should have a complete employment contract with them. You get the advantages of holiday pay,statutory sick pay and other protections that you wouldn’t have as a plain contractor or self-employed person.
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 need to only be repayment of expenditure which you have incurred while doing your work. Travel expenses to and from your office aren’t included because this is viewed as 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 is going to be exercised at 12.07% of your hourly rate. Until you take time off most umbrella companies will hold your holiday pay,you finish a contract of employment or the tax year ends. Sometimes you might get holiday pay month or each week.
Paying Tax with Umbrella Companies
You’re taxed through PAYE when you use an umbrella company. They’ll 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 is included in their fees.
If you want to use an umbrella company,make sure you understand how everything works. It could be a fantastic option for you as a contractor.