Moving to an umbrella company
For a contractor, the quality of your work is the hugely important. It defines you as a professional and enables you to acquire the best contracts.
Some prefer to be able to focus solely on their work and find it difficult to manage other aspects of contracting, such as administrative tasks, tax calc and chasing payments.
Working through an agency, means that you will be required to do these these things for yourself. This usually means working through your own limited company – this option means it is down to you to sort out taxes, payments and other important financial admin.
Doing this properly is very important, and as a result of this, sufficient time must be taken to ensure your tax calculations have been done correctly and that the correct documentation is filled out correctly.
However, there is an alternative to doing this yourself and this is through the use of an umbrella company. This type of firm will manage your finances for you and ensure that it they are done correctly.
What’s more they will chase clients for your pay and make sure you get what you are owed, when you are owed it!
The simplicity of the service is one huge attraction for many contractors, however, there are also other benefits of working through this type of company. Many umbrella companies offer contractors’ insurance as a part of their service, ensuring that you are covered in the event of an accident or on-site incident.
Switching to an umbrella company is not a difficult process, however, you should be prepared for certain changes.
Moving from a limited company to an umbrella means you will now start to pay PAYE taxes. You may earn a little less due to these taxes, but you will save much more time in the long run. Using an umbrella also means you will not have to enlist the services of an accountant as your umbrella will take care of this for you!
When you are searching for an umbrella company the best place to start is by looking for testimonials regarding a particular firm. Have they been used before by other contractors and if so what did they think of the service? Online contractor forums can also be a good place to gather information on a particular company, but remember, forums are a place where people share opinions and experiences, so be aware that what you read is not certified fact.
Generally when it comes to choosing an umbrella company, the older the better! A firm that has been established for a number of years is much more likely to be both reputable and legitimate. Remember, you will be trusting your money to this company, so it pays to do some research beforehand!
Most of these types of firms offer a service called an umbrella company calculator. This allows you to work out what you will take home (after tax) when working through an umbrella. Each company will vary, so it is important to try out numerous calculators. Your decision should not be based on money alone, as the one that promises you the most may not necessarily be the best option for your line of work.