Why should I use an umbrella company
From GunGame5 Documentation
If you decide you would like to work for yourself, whether you decide to call yourself a Sole Trader, a contractor, or a freelancer it is important that you work inside the laws of the nation. This means that you submit the taxes that you owe, though the challenge is establishing exactly how much you do have to pay. This actually leaves you with two solutions, you could act as your very own business and use an Accountant, or work with an umbrella company. They are both going to be expensive for you, but it is far better this way than getting the tax authorities chase you.
You will see that most agencies don't want to get involved with your tax affairs, so will prefer you to work as, or for, a limited company. This doesn't mean that you personally should be a limited company, this is where you'll be able to fulfill their requirements by dealing with an umbrella company. In the event that you aren't already linked with an umbrella company, speak with the agency that are trying to hire you, because they normally have agreements with all the leading umbrella companies. It is also an advantage to join a company which they suggest, as it smooths the payment process out.
Nevertheless, it isn't that difficult to find a company yourself.. Just go to any online job-site and you will see adverts all over the place. Each one of them boasting that they can offer the highest portion of your hourly or daily rate because of their fantastic accountancy system. Actually your realize that they are offering exactly the same service. The main differences between the different companies will be the fees which they take, plus some incredibly minor services they will offer. If you check out their sites there's a good chance of you finding an umbrella calculator that can enable you to enter your rate and it will supply you with a figure of what you might hope to expect as take-home pay.
You must remember that this umbrella calculator is only able to give you an estimated amount, but it's a figure you'll be able to compare with what another umbrella company will offer. They usually work on you possessing a standard tax code, and the contract being IR 35 compliant, but they also do normally subtract their costs before producing the figures. One thing to bear in mind, is always that these calculators aren't clairvoyant, they've no idea, as most likely you do not, how much your business expenses to complete the agreement will be.
You may feel that your net profit is less using an umbrella company rather then having your own limited company if you have seen the figures generated by the umbrella calculator. You might even be irritated you need to pay fees to get paid, but you have to pay an accountant in any case, and you will probably be paying much more, as well as for products and services that you don't use. So if you want a straightforward life being a contractor, don't we all, and you also want to make sure all of your taxes are paid correctly, i'm sorry but you will have to pay them, then using an umbrella company is just about the smartest choice, simply because they will perform all of your records and ensure everything is legal and above board.
