Tens of thousands of contractors and freelancers in the United Kingdom use umbrella companies as their preferred choice of payroll provider. Whatever your profession, using an umbrella company may be the most practical service to support your career. If you are unsure whether you should use an umbrella company for your payroll, the following information should be useful and will give you a better understanding.
Becoming a contractor or freelancer for the first time can be daunting. There are many benefits to being your own boss, but there are also a number of important decisions to make that workers in a full-time role do not have to worry about.
Contractors and freelancers who are looking for a quick payroll set up and minimal administration often decide to get paid using an umbrella company. By using an umbrella company, you will become their employee and will receive the same benefits as an employee in a full-time position. The umbrella company will also take care of your salary, and ensure the correct tax and National Insurance Contributions are sent to HMRC on your behalf (PAYE).
Another benefit of using an umbrella company for your first contract role is that if you decide contracting is not for you, it is very easy to switch back to permanent employment. Most compliant umbrella companies can be used without committing to a tie-in period and there are no joining or leaving fees. This makes them perfect for first time contractors who do not want to commit to their new profession for a long period of time.
Similarly, if you chose to move from your chosen umbrella organisation and start contracting via your own limited company, the closedown process is simple. However, it’s worth bearing in mind that a lot of umbrella providers require you to give a small notice period before concluding with their service (unlike Churchill Knight Umbrella).
If you will only be contracting for a short period of time, it would be beneficial to use an umbrella company. This is because limited companies require more time and effort to set up, whereas contracting through an umbrella company is quick to set up and involves very little administration.
If you are earning £15 per hour or less, using an umbrella company is likely to be the cost-effective way to get paid as a contractor. This is because the other most popular payroll option is setting up a limited company. There are some attractive tax savings available to limited company directors. However, there are higher costs associated with running a limited company which can prove prohibitive to a contractor who is earning an hourly rate of £15 or less.
After recent changes in legislation (off-payroll in the public sector), many public sector contractors and freelancers stopped operating through a limited company started using umbrella companies for their PAYE instead (from April 2017). This legalisation will be rolling out into the private sector in April 2020. As a result, the demand for umbrella companies is likely to increase significantly.
You may decide that you simply do not want the burden and extra work that is involved with running your own limited company. If this is the case, an umbrella company is the perfect payroll solution for you. All the administrative tasks associated with being a director of a limited company are taken care of, leaving you more time to work on your contracts and less time worrying about your finances.
Churchill Knight Umbrella can offer you a simple and compliant payroll solution regardless of the industry you work in, your contract length or rate and your experience. There are plenty of advantages to using our service and you can find out more about our umbrella service on our website.
If you are unsure whether an umbrella company is for you or you want to find out more information, please call our friendly experts on 01707 871622 for a free and impartial consultation. Alternatively, please complete the short form on this webpage and we’ll call you back at a convenient time!