Featured Umbrella Companies
Umbrella Company Information
CUSTOMER-SERVICE POLL RESULTS: Contractor Feed-Back TOP 100 UMBRELLA COMPANIES
REVIEWS: Every UK Umbrella Company Independently Reviewed
APPROVED: The Best in the UK
Useful information & guides for contractors working on temporary contracts.
First-Timers
Quick Start
Expenses
Secrets
Alternatives
Employer's National Insurance
2011 Reader Awards
Calculate your net take home pay
Umbrella Company Guides
Dummies Guide to Contracting & Umbrella Company Services
Simple & Helpful 'How to...' Articles for Contractors
We've got everything a contractor needs to know - you've got a fantastic & free place to help you get the most out of contracting...and certainly the most out of your umbrella company!
From starting out as a contractor to finding the best umbrella company, IR35, claiming business expenses, paperwork & FAQs - look no further!
Categories
A1 New to Contracting
These days every ones at it! Becoming a contractor (freelancer or consultant) is fast becoming a first choice career option. The truth is, it's a clever way of working because boom or recession a contingent workforce is always going to be vital for a healthy & prosperous UK PLC.
A contingent workforce is a provisional group of workers who work for a business on a non-permanent basis.
The country's mobile workforce consists of hundreds of thousands of contractors, all with different and sometimes very specialised skills. Contractors fill the gaps across all industries where leaders rely on being able to call on an immediate resource with specified ability(s).
Some businesses prefer to hire a contractor to do a specific job - cheaper than hiring an employee and providing them with the right training. Other businesses may have peak periods of demand when it makes sense to have a core number of permanent staff which are supplemented by contractors in the busy periods.
Instead of having one permanent job, you'll have a number of temporary jobs. Each contract assignment will be for a designated period (eg 3 months) for a specified amount (eg £10k).
- See what professional relationships you'll have to keep going & nurture.
- Learn to keep the paperwork involved with contracting to a minimum.
- You have to do business through a 'limited company', of some sort (for compliance reasons). You have a choice and should be comparing an umbrella company service to managing your own limited company.
Stay Niche
Staying niche, where possible, is considered the best way to earn a healthy living based on your own specific skill-sets. If you've got knowledge &/or skills, you get more choice when it comes to what work you actually do, and when you do it.
If your ability is particularly rare, or in particular demand at the moment (Y2K), you'll earn a higher rate of pay than if your skills were more commonplace, common sense. If you're good at what you do then you'll soon earn a reputation and be much sought after on the contracting circuit.
Well Rounded
There's more to being a really successful contractor than just your particular industry skills. Do you like meeting new people? You'll be going from one company to another over the course of your career - it's part of what makes the contracting lifestyle what is.
You just need to concentrate on your work whether that be in a rigid corporate environment like a bank, or the more flexible structure of an SME. The client will expect to be kept updated regularly. Can you report in a clear & unambiguous manner?
A vital part of your role is spotting what further work is necessary (that is not currently covered by your contract agreement). You can turn this into a win/win, even if the matter is down to the client's original oversight. The key characteristic is to know when to stay quiet and when to contribute your experience.
HMS Dauntless
If you're not put off and think this is the career for you, investigate a bit further. Look for recruitment agencies who specialise in contractors - there's plenty around. You want to know from the recruitment agency how in-demand your skill-set is, what hourly/daily rate could you expect to earn? Is their a choice of client?
A recruitment agent will always welcome a conversation with a new contractor.
Additional information:
B1 New to Umbrella Companies
The umbrella company service is aimed at contractors who don't like their life clogged up with paperwork, red-tape & endless admin. Sound like you?
If you're after a hassle-free working life as a contractor then registering for the service of an umbrella company is probably now your best choice, all things considered.
A fair work/life balance is part of the decision making process - if you commit to completing HMRC forms connected to having your own one-man limited company then you have to do it. As long as the company is active it needs feeding with paperwork! If you don't, you'll irritate the tax inspector - and that wouldn't be your best professional decision.
If saving the absolute maximum tax right down to the last 1p is your primary driver (regardless of the paperwork needed to save that tax), then you should explore the one-man limited company option.
On the other hand, if finishing for the day and not having to worry about any more paperwork sounds appealing, you've come to exactly the right place to find a good umbrella company service. Plus, you are likely to pay less tax than as an employee!
Intelligent Design
An umbrella company is specifically designed around the needs of a contractor. Not only is your form-filling taken care of, but also all matters & dealings with tax & HMRC. You're not alone if this comes as a massive relief to you - tens of thousands of contractors use an umbrella company every day for exactly the same reasons!
Red-Tape Monster
There are still some contractors around who do business through their own limited company. This choice is best taken by those who are meticulous when it comes to record-keeping, those who have no fear of filling in a variety of forms and who are confident enough to handle HMRC directly.
In its most basic form an umbrella company is nothing more than a ready-made & ready-to-go limited company used as a back-office support function. It's a lot easier than handling your own limited company & cheaper, too.
What's the Best Bits?
No long-term commitments, for starters. The umbrella company service is good for a single day's contracting or for many years - and all times in between. For the occasions when you are not contracting - you don't pay a penny to your umbrella company.
An umbrella company is great because you don't have the worry of filling in paperwork or having to remember deadlines for bills.
"D'oh - why would I want to complete a load of complex & confusing forms every month when there's my umbrella company to do it for me?" Seasoned Contractor, Starting 5th Contract.
The umbrella company service is the much preferred option of the modern contractor, doing what most hate to do - R.I.P. umbrella company paperwork.
Additional information:
C1 Umbrella Company Secrets
Understanding how an umbrella company works will get you part=way to making sure you get the most from the service. We have loads of helpful information including; the questions you should ask an umbrella company if you call them to register (rather than opening an account online), the top five myths & how to pick the best umbrella company service.
The umbrella company service is ideal, see how the service works & how contractors like you get the benefit. The service delivers: 'limited company' status, negates IR35, turns timesheets into cash & sorts out the tax man on your behalf.
Contractors register with, and become an employee of the umbrella company. This leaves all the processing work associated with a contract role down to them. A processing fee is charged each time one of your timesheets is processed. The umbrella company service does all your record-keeping & tax calculations/payments.
This frees up your time and unchains you from spreadsheets & forms!
An umbrella company is nothing less than a total back-office support function for you as a busy contractor.
Additional information:
D1 Introduction to an Umbrella Company
The umbrella company service is specifically designed to remove administration & paperwork from the contractor. An umbrella company helps the contractor by dealing with all the red-tape & hassles usually associated with having to set up & manage a one-man limited company.
Check to see if an umbrella company is the right option for you.
Choices
Contractors enjoy a lifestyle & sense of freedom that comes with being their own boss. Choosing how to trade as a contractor is an important part of contracting, and the choice comes down to either setting up & managing your own limited company or using the umbrella company service.
Stress-Lite
While there are some contractors who enjoy doing the paperwork, handling HMRC and keeping correct records, many opt for the less stressful option of an umbrella company to do all that for them.
Having to manage your own limited company was something they did in the olden days!
Take-Home Pay
Permanent employees don't have the decisions that contractors face, with tax implications having a bearing on how much they take-home each month. It is normal practise for contractors who use an umbrella company to off-set some of their tax liabilities through claiming legitimate business expenses.
Off-the-Shelf
A key benefit of the umbrella company service is offering you a ready-made limited company through which you can contract, and there's no charge for any times you are out of contract.
Why Worry?
Let the umbrella company do the worrying! Let the umbrella company:
- Process your timesheets
- Understand business expenses
- Raise invoices to the agency
- Handle credit control
- Calculate tax & National Insurance
- Collect payments from the recruitment agency or end client
- Handle legal contracts
- Do the filing
- Stay up to date with HMRC legislation
When you register with an umbrella company you become an employee of that umbrella, but importantly you keep the flexibility to find & choose your own work.
An umbrella company is designed around the needs of today's contractor who has better things to do than sit in front of a PC and struggle with spreadsheets, forms & red-tape.
Additional information:
- 60 second Guide to an Umbrella Company
- Finding The Best Umbrella Company for You
- Have You Considered an Umbrella Company
- HMRC Umbrella Companies
- How Much Should you Pay for an Umbrella Company
- How to Choose an Umbrella Company
- Is using an Umbrella Company your Best Option
- Some of the Benefits of Working Through an Umbrella Company
- Umbrella Companies Are they worth it
- Umbrella Companies and HMRC
- Umbrella Companies are Made for Contractors
- Umbrella Company Contracts
- Umbrella Company or Limited Company
- What are the Benefits of Working Through an Umbrella Company
- What Does an umbrella Company do for Me
- Why would a Contractor consider using an Umbrella Company
E1 Umbrella Company Expenses
Three Steps to Claiming Business Expenses through an Umbrella Company
When you do start contracting you'll have plenty of reasons to join an umbrella company: they're simple, cheap & hassle-lite. The umbrella company service is also a means to reducing your tax by way of claiming business expenses.
HMRC decide what expenditure can be classified as a legitamate business expense, not the umbrella company. Each umbrella company is bound by exactlty the same rules. It's a myth that one umbrella company can offer a wider choice of expenses than another - they can't.
Business expenses include things like travel, daily subsistence & training.
Umbrella Company Expenses
If you're using the service of an umbrella company you can claim the cost of travel to the client's premises, as well as certain costs for food & drink.
However, if it's your plan to do just a single one-off contract and then leave your umbrella company you're not entitled to claim any expenses.
This is because a one-off contract role would be deemed as your permanent workplace, and travel between home and office is treated as normal commuting - not an allowable business expense.
Business Expenses Rule 1
You have certain rights as an employee (eg National Minimum Wage and Sick Pay), and you have other rights (eg place of work) depending on your umbrella company contract of employment. Contractually, your umbrella company will provide you with various contract assignments to complete (these are the contract roles YOU get!).
As the place of work is temporary you may claim travel costs as expenses.
Business Expenses Rule 2
You will set up an office at home and use your home office to:
- Find new jobs
- Training
- Use as a base to travel to your contract(s)
- Complete any paperwork as required by your umbrella company
Your contract roles therefore take place at temporary workplaces. This is important because:
You can claim an allowance for use of your ‘home as office' - which is free of tax and an allowance for business travel to a temporary workplace (your contract location).
Business Expenses Rule 3
Your umbrella company is required to check & validate business expense claims and where possible verify claims with receipts.
In some instances the umbrella company is allowed to pay some expenses at scale rates. It is not intended to make you a profit.
At the out-set knowing what business expenses you can claim can be confusing. Often, the best way to keep within the law is to use an umbrella company.
You get access to free legal advice from experts whose job it is to stay right up to date with HMRC legislation - as well as everything else!
Additional information:
G1 Umbrella Company Alternatives
As a contractor you don't have to use an umbrella company. Prior to the year 2000 (the year of IR35), contractors had no option but to set up & manage their own private limited company. Today, the umbrella company service is the perfect alternative for every contractor who wants minimum hassle & zero red-tape.
Legitimate umbrella company alternatives include setting up your own private one-man limited company or using the services of a recruitment agency PAYE scheme.
Dodge-ball
There are also some dodgy schemes out there - beware! If you come across any of the following be very careful:
- Offshore
- EBT
- 80%+ take home pay
- Loan schemes / Special schemes / Incredible schemes
What Are Your Options?
You have two mainstream options if you do not want to use an umbrella company.
1. Recruitment Agency PAYE - 'going agency PAYE'
Quite simply, you become an employee of the recruitment agency that finds you the contract role. The recruitment agency is your limited company and will sign the contract with your client - with you as the named contractor doing the work.
Trading through your recruitment agency is a no-brainer. Unfortunately... this method is terrible in terms of net pay. You pay the most tax when going agency PAYE.
You're not allowed to claim any expenses, so your entire gross pay will be at the mercy of income tax & National Insurance. An umbrella company is almost as simple and you'll end up with a higher net pay.
Not all recruitment agencies offer this alternative, there's quite an extra cost burden to set up and often it's just not worth their while to do so.
2. Set Up & Manage your own Limited Company
Setting up and running your own limited company is fast losing its appeal to most contractors. It's often more expensive than the service of an umbrella company, and certainly requires a lot of input from you on a regular basis. It's like a second job, on top of your contract roles.
It'll be your neck on the line if the company isn't compliant in every way. What puts off quite a few from this route is the many complex rules to adhere to - across a wide range of disciplines. You'll have to appoint an accountant and this isn't the only extra cost.
Umbrella company service or one-man limited company? See what our Experts say.
Additional information:
H1 IR35 What Why Who
IR35 Background
Before 2000, HMRC suspected some contractors were avoiding paying the correct amount of tax. They would quit their full-time job on a Friday, set themselves up as a contractor with a limited company and return to the same job on the Monday.
The significant difference is that the client now hires 'A. Smith Ltd' to complete the work, rather than employee 'Andrew Smith'. Critically, limited companies offer the contractor the chance to take some of the income as a dividend which has a lower rate of tax than income tax.
HMRC called it 'disgused employment' - 'A. Smith Ltd' was in effect employee 'Andrew Smith'.
Will HMRC Notice?
Be aware, HMRC look very closely at how contractors trade. They even have a dedicated Tax Unit specifically for contractors. They can go back years into your professional life and demand you prove you were not in 'disguised employment'.
A big criticism has been that the legislation is unclear - no excuse, it doesn't detract from the reason why the law was introduced in the first place and the principal behind IR35.
It can be difficult to know whether your contract is caught by IR35. Ask 100 employment lawyers to look through your contract and you'll probably get 100 different answers!
You'd be classified as a 'disguised employee' if in every respect you're working like an employee but trading as a contractor.
Genuine Contractors
As a genuine contractor you would be running your own small business providing your own equipment, like a PC. You'd also have your own office with a website, business cards and letter-headed paper. You would also have your own accountant &/or lawyer and perhaps some secretarial support. You would actively advertise for business and maybe employ others with similar skills.
Genuine limited company contractors would negotiate a price for a job, rather than an hourly rate, they'd fix any problems and make up for delays in their own time.
Disguised Employment
A contractor in disguise would turn up at the client's office and, for example,
- Only use the client's equipment (eg PC)
- Have their work checked in stages by a line manager, who would also tell them what they should be doing
- Carry on in the same way as the client's permanent employees
This is intended purely as an overview of IR35 and in no way meant to be relied on by a contractor determining what tax they should be paying!
Additional information:
K1 Construction Industry Scheme CIS
Many contractors involved in the construction industry will come across the Construction Industry Scheme - CIS. This scheme has its own rules & regulations when it comes to HMRC and paying tax.
An umbrella company that specialises in CIS is ideal for the contractor who wants to off-load as much administration & paperwork as possible. If you're a construction worker find out how the services of an umbrella company can help you have a stress-free contracting life.
It's a Tax Thing
The Construction Industry Scheme (CIS) is simply a tax system for anyone in conventional construction work. CIS is the tax man's rules that govern what tax is owed when contractors pay subcontractors.
Sign-Up
Any construction business or subcontractor needs to be registered as CIS for tax purposes.
Tax Made Simple - Really!
Some sub-contractors have hired accountants to help with the paperwork & tax but the umbrella company service does everything for you, including to offer advice on completing your self-assessment.
Often the self-assessment will lead to a tax rebate - so complete the return as soon as possible!
The umbrella company service is there to do all the admin & paperwork - so you can get on with your job knowing all the red-tape is dealt with.
Why not spend a few minutes looking into the umbrella company option?
Additional information:
L1 Umbrella Company News
An umbrella company is certainly the best way for a contractor to trade. Here is a selection of the latest news and views from a variety of umbrella companies across the UK.
Keep updated with all the latest news and events from your umbrella company.
N1 CV Help Hints and Tips
A CV is a vital link in the process of landing a contract role. As a contractor you should learn how to present your CV in different ways depending on the particular role you are looking for.
The purpose of a CV is to secure an interview. The competition for each available contract role is tough so make sure you understand how to craft your CV for maximum effect.
Additional information:
N3 Contractor Interview Tips
As a contractor you are likely to attend several job interviews over the course of your career. There are many types of interview and you need to understand the subtle differences between them. If you're new to contracting click here.
At the bottom of the page is further information including: one on one interview, frequently asked interview questions & more. Plus some useful tips & hints on how to maximise your impact.
Check out the general interview tips, advice on passing the interview & what sort of questions you should be asking your recruitment agent. Make sure you get the basics right and shine a light on your strengths.
Planning is the key, but you probably already know that.
Further information:
W1 Best Umbrella Company
Discover which umbrella company service has been voted the best in the UK, learn how you can resolve any dispute and really understand how you can get the most from your umbrella company.
You will find our helpful guides New to Contracting and an Introduction to an Umbrella Company if you have not been in a similar situation before. You can also see what IR35 means to you in our One minute guide to IR35.
When you have a spare minute see who the winners are in the industry's biggest customer opinion poll. The 2011 Umbrella Company Reader Awards is the collective feed-back of thousands & thousands of fellow contractors.
We collect these anonymous votes and add them to our Official Top 100 Umbrella Company Chart. Or, if you prefer, run through the independent reviews of every umbrella company service.
If you remain undecided on which service to open an account with, our list of the UK's Approved umbrella companies should be the place for you.