If you are currently working in the private sector as a contractor or freelancer, you may find that you require the services of an umbrella company in the near future. We explain why this is and why you have absolutely nothing to worry about.
IR35 is HMRC’s way of trying to level the playing field, as they believe many self-employed workers have been incorrectly paying themselves with a combination of dividends and salary – when they are actually working in the same way as permanent employees (who cannot take advantage of the tax savings).
Changes to off-payroll legislation in the private sector will undoubtedly see an increase in contractors and freelancers using umbrella companies for their payroll.
From April 2020, temporary workers will no longer be able to determine their own IR35 status and instead, this responsibility will fall on the end client. As a result, private sector organisations may decide to class all of their contractors as inside IR35, meaning an umbrella company is probably the best option for their payroll. Alternatively, private sector clients may choose to only engage with contractors through umbrella companies moving forward (removing the risk of incorrect IR35 assessments).
The changes to off-payroll in the private sector have already been rolled out into the public sector (April 2017).
If you work through an umbrella company, you will technically become an employee of theirs and will receive your salary just like a full-time employee (PAYE). Therefore, you can expect to retain between 65 and 75 percent of your pay.
Unfortunately, umbrella companies will not be as tax efficient compared to paying yourself as outside IR35 through a limited company.
You can request a personalised umbrella company take home pay projection here.
Umbrella companies are a popular choice for contractors in both the public and private sectors. They are generally accepted as the easiest way to get paid as a contractor and there is a very small amount of administration required to get paid on time.
When you have chosen an Umbrella Company to join, the sign-up process is easy. Once you have completed a form (usually takes 5-10 minutes) and provided proof of your identity, you’re almost done. In order to get paid on time, you must remember to submit signed timesheets to both your recruitment agency and Umbrella Company.
If you are looking for a compliant and reliable umbrella company for your payroll – look no further than Churchill Knight Umbrella. We have over 20 years’ experience working within the contractor payroll industry and we have thousands of happy contractors on our books. There are plenty of benefits to our umbrella service and you can find out more here.
Whether you are working in the public sector or private sector, we have compliant and efficient payroll services that will help you (both limited and umbrella). Please give our friendly team a call on 01707 871622 or complete the short form on this page and they will get back to you shortly.
You may notice some umbrella companies are advertise themselves as an “Umbrella Company Public Sector” or “Umbrella Company Private Sector”. Don’t let this mislead you. Compliant umbrella companies can be used by contractors in both the public and private sectors.