What Are the Advantages of Using an Umbrella Company?
If you’re new to contracting then it can be a difficult decision whether to use an umbrella company or set up your own limited company. Both have their advantages and disadvantages and it mainly depends on how involved you want to be in the process.
What Is an Umbrella Company?
The umbrella company basically acts as the contractor’s employer. At the end of each week or month, the contractor will forward their timesheets to the umbrella company, which will then invoice the company they work for. When the invoice is paid, they will transfer the money by PAYE, so all the tax and National Insurance will have already been deducted. This means that the contractor won’t have to calculate their payments.
Why You Should Use an Umbrella Company
Umbrella companies can be used by any type of contractor, whether you’re considering it as a long-term career option or as a short-term solution. However, they’re particularly beneficial to those who are contracting while they’re in between jobs or trying it to see if it works. Rather than having to deal with the hassle and cost of establishing your own limited company, you can simply pay a fee to the umbrella company, which will then deal with all the invoicing and financial issues.
If you’ve never had to organise your tax affairs before it can be extremely confusing and time-consuming. You need to make sure that you keep details of all your income and expenses, as well as ensure there are no mistakes or issues that HMRC could pick up on. An umbrella company will deduct your tax and National Insurance contributions on a monthly basis, allowing you to focus on the important daily tasks.
You’re still able to claim expenses if you use an umbrella company, as you would if you were an employee of a company. To ensure they’re accepted by HMRC, they need to be valid business expenses and you must keep receipts for anything you claim for. The umbrella company can file all these expenses and deal with the invoicing and payment.
Choosing an Umbrella Company
Signing up with an umbrella company is quick and simple. Once all the initial paperwork has been completed, there’s very little administrative work required on your part. You just have to send them your timesheets and any expense receipts and they can deal with everything else. This ensures that no matter how busy and hectic your schedule is, your invoices will always be sent out and paid on time.
There is a wide range of umbrella companies to choose from; you should research the one that suits your requirements. Some offer services specifically for different industries or have products designed to suit simple or more complex contracts. Before signing up you should check if there are any hidden costs or fees and whether they have a minimum contract period. Above all, make sure you feel comfortable with the company and the service they provide.
If you are looking for an umbrella company then iPaye should be one that you consider. Visit their website today for more information.
Image Credit: Hartwig HKD