"An Umbrella Company acts as your employer and pays you directly into your personal bank account after taking deductions."
Umbrella Company Explained
So, you have just been offered a new contracting role and you are excited to be self-employed, your recruiter has informed you that you need to use an umbrella company.
There are officially 2 routes to choose from when contracting; which are being paid through a Ltd company or an umbrella company. There are factors to consider for each route which you can find in our help & advice section under Ltd vs umbrella guidelines.
An umbrella company is a very simple, quick and efficient way to be paid and is usually a great way to start for people who are new to the contracting world.
As you are now contracting and are self-employed you are responsible for ensuring you have adequate insurances to cover you whilst working.
The good news is that most umbrella companies will as part of their package include contract insurance cover which usually consists of professional indemnity insurance, employer’s liability insurance and public liability insurance which normally covers you of up to 5 million pounds.
Benefits & Expenses
Because you are now self-employed you are entitled to more benefits and can claim for expenses. The HMRC allow you to claim back expenses which are most commonly:
Additional meal expenses, travel expenses, protective clothing, training, Insurances, pension, eye test, subscriptions, equipment, personal incidental expenses, charity donations, working from home, secondary accommodation & more.
Umbrella Company Summary
To summarise we would advise anyone who is new to contracting to probably use an umbrella company first, they will help you build confidence and are usually a hassle free option. If you are earning more than £110 per day it could be more beneficial choosing the Ltd route as you would maximise your take home pay, however the responsibility is much greater and the process is slightly more complex as you would want to hire a professional accountant and set up your own Ltd Company.
To find out more about contractor accountants or setting up your own Ltd Company click here.
If you require any additional information please give us a call on 01462 510 900.