Recent changes in legislation (off-payroll working rules) have seen a rise in demand for umbrella companies throughout the UK. However, if you’ve never used an umbrella company before, there can be a lot of information to digest. And, with over 500 umbrella companies to choose from – how do you know which one is best? Our latest article summarises 10 tips for workers new to umbrella companies, and we hope you find it helpful.
Request a take home pay calculation
Before registering with an umbrella company, it’s a good idea to request a tailored take-home pay projection. This will provide you with an accurate indication of what you will retain each payment frequency. Umbrella companies should provide you with a precise calculation based entirely on your circumstances, and they should include a breakdown of the deductions.
Understand how umbrella companies work (PAYE)
When you join an umbrella company, you will become their employee, and they’ll be your employer. Assuming the umbrella is compliant, they’ll process the payments of their employees using HMRC’s tax system Pay As You Earn (PAYE). This is the same system that is used by organisations paying permanent members of staff.
Umbrella companies receive their workers’ funds from the agency or end-client and then make the appropriate deductions before paying workers their net salary.
Familiarise yourself with umbrella company payslips
If you’re new to umbrella companies, payslips may be slightly confusing, Therefore, we recommend you take a moment to familiarise yourself with umbrella company payslips before registering with an umbrella – so you know what to expect.
Registering with an umbrella company usually takes about 10 – 15 minutes
When you register with an umbrella company, you’ll be required to provide a lot of information. This is a legal requirement, and the umbrella company cannot pay you without it. The information you’ll be required to provide will include your full name, date of birth, address, national insurance number, assignment details, contact information, and more.
You will also be required to provide proof of your identification and share a copy of your passport or VISA with the umbrella company. The same applies to your Right to Work in the UK – if you’re not a UK national. While providing this information can be frustrating, it’s important to remember that compliant umbrella companies must have it to process your payroll legally.
Umbrella companies usually include extras as part of their service
Most umbrella companies will offer more than just a payroll service. Take Umbrella Company UK for example! All of our employees have access to statutory employee rights, Same Day Faster Payments, access to our state-of-the-art app, free £25 million insurance, exciting referral rewards, and more!
Take note of the relevant contact information – should you need it
Once you’ve registered with an umbrella company, your administrative responsibilities will be minimal. In theory, everything should run smoothly, and if you’re required to submit timesheets, doing so should be very straightforward. However, it’s a great idea to note the relevant contact information – should you have a question or concern during your time with an umbrella company.
Only consider using compliant umbrella companies
With over 500 umbrella companies in the UK, choosing the right provider may seem like a daunting task. However, here is an invaluable tip – only use a compliant umbrella company for your payroll.
To find a compliant umbrella company, we recommend you only consider using one accredited by the Freelancer & Contractor Services Association (FCSA). The FCSA is the UK’s leading professional body dedicated to ensuring the supply chain of temporary workers is compliant with HMRC and UK tax law. To obtain FCSA accreditation, umbrella companies must undergo a series of assessments and audits. As a result, they must prove they operate compliantly and in their employees’ best interests.
By limiting your umbrella company hunt to an FCSA accredited provider only – you’ve made your life a whole lot easier already! And, you know your payroll will be in the safest hands. Engaging with a tax avoidance scheme, even by mistake, could land you a life-changing fine from HMRC.
Umbrella Company UK is proud to be accredited by the FCSA, and we believe there is no better way to showcase our commitment to compliance within our sector.
Keep your limited company operational – if you have one
If you’re used to contracting outside IR35 through a limited company, we recommend you keep your limited company open so you are ready to return at a later date. Just because you decide to take one assignment that requires the services of an umbrella company doesn’t mean all your future roles will be inside IR35. Use an umbrella company calculator to understand how your pay will vary depending on your IR35 status.
Understand that it’s unlikely you can claim expenses
In 2016, supervision, direction and control (SDC) was introduced by the government. The legislation was designed to stop those who HMRC considered ineligible to claim tax relief on travel and subsistence expenses. To put it simply, if an umbrella employee is subjected to supervision, direction or control while working on their assignment, they’re not entitled to claim tax relief on travel and subsistence expenses. A worker who is subjected to SDC is effectively working as a permanent employee in the eyes of HMRC, and as permanent staff aren’t entitled to tax savings, HMRC wanted to level the playing field.
Consider salary sacrifice to boost your pension contributions in a tax-efficient manner
Everybody’s circumstances are different, but if you’re looking to save for your future in a tax-efficient manner, using an umbrella company that can provide salary sacrifice may be beneficial. Salary sacrifice for pensions allows workers to put more of their earnings aside into a personal pension pot each time they’re paid. And, as the payments are going into a pension, they’re not subjected to tax – making salary sacrifice a great, tax-efficient way to save for retirement.
Umbrella Company UK
If you’re new to umbrella companies, please give our friendly team a call for a free consultation. As a member of the FCSA, Umbrella Company UK is committed to providing our employees with excellent customer service and compliant payroll. Please call 01707 669023 or contact us here. We would also be delighted to provide you with a free, tailored umbrella company calculation. You can request a take-home pay calculation now by clicking here.