IR35 Umbrella Companies

Newbie?

Are you new to contracting? Are you looking for an IR35 umbrella company (click here to see what an umbrella company can do for a contractor)? If you are you could be looking for some time because there's no such thing as an ‘IR35 umbrella company'. IR35 is simply an HMRC reference to a certain legislation which stops contractors from avoiding tax.

All umbrella company services operate within IR35 because they tax their clients at source in line with PAYE rules - just like a full-time employee of any company.

Employee Status

In fact, when a contractor uses an umbrella company they become an employee of their umbrella company. The umbrella company (the employer) will invoice & collect your earnings from your recruitment agency, calculate what tax you owe as an employee then pay you a net salary.

The contactor pays: income tax and National Insurance. The contractor does not get any dividends.

Recap

1. There's no such a thing as an IR35 umbrella company
2. All umbrella companies are IR35 friendly
3. You do not need to worry about IR35 whatsoever

All umbrella companies operate the same way (in terms of tax) and all umbrella company services are fully aware that IR35 has no bearing on their clients.

If you're new to contracting then you should read our 60 second guide to an umbrella company before making any decisions.