Contractors can discover an umbrella company is a great solution for managing clients and their money. 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 considering using an umbrella company,you must make certain you do things and know how to get the most out of using the company. There are a few 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 must make certain that it’s the ideal selection for you. It’s not necessarily acceptable for all contractors,which means you want to evaluate the advantages and disadvantages 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 pay you through PAYE, as you pay them a fee. It helps you to prevent issues around IR35 and simplifies things like accounting and taxes for you. You may pay to a pension and get 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 to know a few of the laws they have to follow. Firstly,an umbrella company should pay their contractors the minimum wage. They make up the difference with expenses and can not pay below that. Umbrella companies offer the protections that an employer does,and you need to have a employment contract together. You get the advantages of sick pay,holiday 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 need to be repayment of expenditure which you have incurred while performing your job. 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 not claim tax relief on travel and subsistence.
Umbrella Companies and Holiday Pay
As you are treated like an employee by the umbrella company,you are entitled to holiday pay. Typically,it will be exercised at 12.07% of your hourly rate. Your holiday pay will be held by umbrella companies until you take time off,you complete a contract of employment or the tax year ends. You might get holiday pay month or each week.
Paying Tax with Umbrella Companies
You are taxed through PAYE when you use an umbrella company. They’ll send you a P60 at the end of the year and can do some other 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 first. It could be a good choice for you as a contractor.