Advantages of using an Umbrella Company

Advantages of using an Umbrella Company

Using an umbrella company essentially means that you as ‘the contractor’ become an employee of the umbrella company.

As part of the process you submit timesheets to the umbrella company who will in turn invoice the end client (or agency) for the work that you have carried out. You are then paid by the umbrella company as a PAYE employee - less the umbrella fee.

Umbrella companies carry many advantages for contractors including:

  • They are easy to use. Contractors using umbrella companies simply submit their time sheets and expense claims to the umbrella company and wait to be paid.
  • All tax and NI is calculated and deducted by the umbrella company prior to you receiving your money. This means you do not need to worry about calculating your tax
  • Umbrella companies are suitable for those contractors who have both long and short-term contracts who want minimal input
  • Umbrella companies offer suitable solutions for contractors at all salary rates.
  • They offer the perfect solution for those who are unsure about contracting or are simply contracting as an ‘in between’ job as there is minimum input required.
  • Aside from the timesheets and expenses claims there is very little other paperwork to be completed.

As an employee of an umbrella company you are also usually be able to claim basic expenses. Despite popular myths all receipts should be kept for the expenses that you claim. If you claim expenses for things that you never actually bought or do not have receipts for and HM Revenue decide to investigate your accounts, your expenses would be disallowed and you may be liable for all the tax owing. To find out more about contractor expenses click here

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