Contractors can discover thatan umbrella company is a great solution for managing clients and their money. They can ensure you’re not breaking regulations andgive you the security of being an employee without the trouble of setting up a limited company. If you’re thinking about using an umbrella company,you must be sure thatyou do things properly and know how to get the most from using the company. There are a few things to consider if you would like to get the full benefit 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 ideal selection for you. It’s not suitable for all contractors,which means you need to assess the pros and cons 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 as you pay them a fee. It enables you to prevent problems around IR35 and simplifies things like accounting and taxes for you. You can pay to a shared pension and get insurance through an umbrella company.
Know the Law Surrounding Umbrella Companies
If you’re going to use an umbrella company,it’s a fantastic idea. Firstly,an umbrella company needs to pay their contractors the minimum wage. They can’t pay below that and then make up the gap with expenses. Umbrella companies provide the protections that an employer does,and you should have a employment contract together. You get the benefits of holiday pay,statutory sick pay and protections that you wouldn’t have as a plain contractor or person.
Claiming Expenses with an Umbrella Company
Expenses can find 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 be repayment of expenditure which you have incurred while performing your work. Travel expenses to and from your office aren’t included because this is seen as commuting,as a fulltime employee would do. HMRC determined that under Supervision,Direction or Control,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. Your holiday pay will be held by most umbrella companies until you take off time,you complete a contract of employment or the tax year ends. You might receive holiday pay each month or week.
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 some tax tasks for you too. When you opt for a company,check what is included in their charges.
If you would like to use an umbrella company,make sure that you understand how everything works. It could be a fantastic option for you as a contractor.