“Best umbrella company” is a term you’re likely familiar with. What you should be asking is “which umbrella company is the best for me?”. Having your specific needs met in a friendly, supportive manner is what separates the good umbrella companies from the best.
There are recommended umbrella companies that have become an authoritative name in the industry over the years. If you’re a person who tends to gravitate towards brand longevity, this might be your main criteria for choosing your best umbrella companies and we do recommend looking for a company with a good brand reputation.
A compliant umbrella company will employ the contractor, while the contractor performs assignments for the end hirer. The main function of an umbrella company is to facilitate payment to the contractor, after deducting PAYE tax and National Insurance contributions.
Working in conjunction with recruitment agencies, end hirers and workers, a compliant umbrella company will deduct PAYE tax and National Insurance contributions at source, before paying the net wage to the worker. Wages will be based off timesheets the worker submits to the umbrella company. As the employer, the umbrella company also provides payslips.
There is nothing in the legislation which prevents you from operating through your limited company if your contract is inside IR35. The most pertinent benefit of working under an umbrella while inside IR35 is the ease of administration. Once caught by the legislation, workers forfeit the tax planning opportunities of being outside IR35, as well as the benefits associated with employee-status. Using an umbrella company translates into a simplified process for the worker while remaining compliant.
Certain expenses cannot be claimed when working under an umbrella, such as travel and subsistence. Mileage claims can be submitted on the condition your assignment is not subject to Supervision, Direction or Control (SDC). You may also be able to claim for equipment and training expenses incurred wholly and exclusively for business use.
All you are required to do is inform your umbrella company of your intended move and once they have paid you any money owing to you, they will issue a P45. You can then go on to conduct work through your limited company.
Even if you choose the best umbrella company in the UK with outstanding service, support and fees, operating under an umbrella may still not be to your best interests. If you are outside IR35, operating through a limited company will always be the most tax-efficient option, increasing your take-home pay when compared to working under an umbrella company.
Working inside IR35, the choice is still entirely yours as to whether you want to operate under an umbrella or go limited. The clear advantage of working under an umbrella is that as you become an employee of the umbrella company, and IR35 is no longer a factor you need to consider or be affected by. This could be enough of a deciding factor for many contractors who want to avoid IR35 intricacies altogether.
Please provide some details to continue.
Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.
If you're already a client of ours, you can speak to your dedicated accountant directly.
Monday - Friday (9am to 5pm)