Umbrella Company With Running a Limited Company
What is an umbrella company?
An umbrella company acts as an employer to those who work below a fixed time contract or are self-governing contractors. Umbrella companies take away the managerial duties and responsibilities associated with running a Limited Company.
How does an umbrella company work?
If you employ an umbrella company, it will issue invoices to your client on your behalf. When the payment of the invoice is made by the agency or client, the umbrella company will work out tax owed and National Insurance contributions which are due. The umbrella company will pay you through the PAYE (Pay as You Earn) scheme and you will accept your net pay in your personal bank account. This way you are entitled to decreased taxes and advantages such as national insurance liabilities, which employed status usually brings.
Tips when dealing with an umbrella company
Your employment contract with the umbrella company should be drawn up as if you are a ‘permanent employee’. You can list your home address as your permanent work place, and this enables you to claim expenses. Keep in mind that you are only able to claim expenses that are related to work purposes.
Umbrella Company Services Providers
Naturally, there is a payment for providing an umbrella service which can vary massively between dissimilar companies.For new contractors the umbrella company is frequently an appealing choice, as it offers an easy and cheap way to decide if contracting is for you.Many contractors, especially those who are contracting long term or want the best possible return normally decide to start their own limited company, which we will move onto now.
Make sure that you obtain a receipt for every cost that you claim – this is because HMRC can examine you up to six years after you build a claim. Make sure that you are enclosed by the umbrella companies insurance, which includes public and employer’s liability and professional indemnity insurance.
All umbrella companies should use the same calculations given by the HMRC, which means that your earnings should not be any higher or lower than they are with any another umbrella company. What differs between umbrella companies are the service and the fees that they charge. You usually have to pay a monthly fee in this situation. However, if you are a contractor, you will not be working all year round, so it is worthwhile looking into umbrella companies that do not charge a fee when you are not working.
Certain umbrella companies offer a free and instant set up and do not charge a penalty or hidden fees if you leave their employment – they are extremely flexible.
Ensure that the umbrella company you select is legitimate and registered with various revenue services and follows legal procedures. Before selecting, make sure you question the umbrella company on all aspects.
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