Contractors can discover thatan umbrella company is a solution for managing their money and clients. They can make certain 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 considering using an umbrella company,you must make sure thatyou do things correctly and understand how to get the most from using the company. There are a few things to consider if you would like to get the benefit of an umbrella company.
Make Certain an Umbrella Company Is
Before using an umbrella company,you must make sure that it’s the right choice for you. It’s not necessarily acceptable for all contractors,which means you want 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 cover you while you pay them a fee. It enables you to prevent issues around IR35 and simplifies things like bookkeeping and taxes for you. You may pay into a shared retirement and get 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 thatthey have to follow. Firstly,an umbrella company needs to pay their contractors the minimum wage. They then make up the gap with expenses and can not cover below that. Umbrella companies also offer the protections that an employer does,and you need to have a complete employment contract with them. You get the advantages of sick pay,holiday pay and protections that you wouldn’t have as a contractor or individual.
Claiming Expenses with an Umbrella Company
Claiming 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 be repayment of expenditure which you have incurred while doing your work. Travel expenses to and from your office are not included because this is viewed as commuting,as a fulltime employee would do. HMRC decided that under Supervision,Direction or Control,contractors can not claim tax relief on travel and subsistence.
Umbrella Companies and Holiday Pay
As you’re treated like an employee by the umbrella company,you’re entitled to holiday pay. Typically,it is going to be worked out at 12.07% of your hourly rate. Until you take time off your holiday pay will be held by umbrella companies,you finish a contract of employment or the tax year ends. You might get holiday pay each week or month.
Paying Tax with Umbrella Companies
You’re taxed through PAYE when you use an umbrella company. They will send you a P60 at the end of the year and can do any tax tasks for you too. When you opt for a company,check what’s included in their fees.
If you would like to use an umbrella company,make sure that you understand how everything works. It could be a fantastic choice for you as a contractor.