An Umbrella company is an invoicing vehicle that contractors use instead of their own personal bank accounts. Instead of managing contracts and paying tax and National Insurance, an Umbrella company pays these costs for the contractor. In addition, umbrella companies do not need to comply with IR35 legislation. Umbrella companies offer their contractors the following benefits:
A long-standing, reputable Umbrella company should have a proven track record in the industry. Check the company’s credentials on specialist contractor portals or forums to see how long they have been in business. Also, look for testimonials from other contractors who have used the company. Then, read their contract terms and conditions carefully. If you find any, be wary of scams. It’s better to stick with a reputable company.
While an Umbrella company may appear to be a convenient option, you should be aware that these companies pay a lower rate than your regular employer. This is because your income goes straight to the Umbrella company, and the company is therefore able to pass the payments down the supply chain more easily. In addition, you’ll be able to take advantage of benefits that you wouldn’t otherwise enjoy as a freelancer. You can also avoid the hassle of keeping track of invoices – an Umbrella company can invoice agencies, clients, and employees – while paying you directly.
A good Umbrella company will be fully compliant with local labor and tax agencies. You can also request copies of audited compliance records. A good Umbrella company will assign a dedicated account manager to each client. Some companies, like Horizons, are dedicated to global business solutions. They offer additional support for their clients and do not require legal entities to hire their employees. You can find a great Umbrella company in your area by checking their background.
Before you sign up with an Umbrella company, you should make sure you are in compliance with tax laws. If the company does not pay your taxes correctly, you could face stiff penalties from the HRMC. The government is cracking down on companies that are not compliant, including those that run offshore loan schemes and tax avoidance schemes. You may also want to check whether they’re HMRC-approved. In addition, they should provide you with a bespoke payslip that has a breakdown of their calculation.
An Umbrella company is more secure than a standalone entity. The end client pays the Umbrella company, and the Umbrella company calculates national insurance contributions and income tax, and deducts the management fee that the umbrella pays for handling your account. After the contract has been signed, your Umbrella company will pay you directly into your bank account, and you will receive a payslip detailing your income tax, pension, and national insurance contributions. You should also make sure to review the Umbrella company’s terms and conditions carefully.
Another major advantage of an Umbrella company is benefits. Unlike contractors, Umbrella company employees enjoy benefits and services that are unavailable to independent contractors. A recent survey by the Freelancer and Contractor Services Association revealed that 76 percent of respondents do not receive paid leave. Benefits from an Umbrella company include health insurance, pension schemes, and paid leave. These can be quite attractive to a freelancer. And because they don’t need to disclose these details, umbrella companies are often preferred by many clients.
