Advantages of Using an Umbrella Company

These days Umbrella Companies are becoming much more prevalent, and they are proving to be invaluable in providing contractors and freelancers with a hassle-free and profitable alternative to setting up and running a limited company.

The self-employed, freelancers and contractors may all be able to find and successfully complete the work available in their field, while setting up a work schedule that really suits them and their clients. However, they often encounter problems with the legal requirements and red tape and find the cost of starting up their own business daunting.

There are the problems of licenses, accounting, invoicing, administration and marketing not to mention the headache of the taxation system. The need for the services of an accountant and other legal workers to cover all the different aspects of their company can mean additional outlay.

The main advantage of an umbrella company is the easy way all the administrative and taxation details are taken care of. Basically, the umbrella company provides payroll services on your behalf and they are the ones who bill the client or agency for the actual work that you have done. You do the same work but are now considered to be employed by the umbrella company with absolutely no need to contract the services of accountants and legal advisors.

Generally, you will only be required to submit timesheets, these are needed to invoice the clients, and your expense claims. When the invoice is paid they will usually pay you through PAYE with the added benefit of claiming expenses such as travel and accommodation.

As you are classed as an employee, typically in a management or senior official role, a professional occupation or an associate professional and technical role, it is the umbrella company that is liable to pay all the relevant social contributions and tax payments. These social contributions are more advantageous than those paid by a self-employed person; particularly, when you reach retirement age or if your business folds.

An umbrella company is definitely advantageous and can mean an increased take-home pay. However, this does not mean that you want to all that extra pay to be taken up by the umbrella companies’ fees. A company with a fixed fee structure is probably the best, some umbrella companies want to charge a percentage of your invoices and this may add up. Choose one that is compliant with HMRC rules and regulations, after all you want to benefit from the legal advantages.