Most contractors and freelancers employed by an umbrella company do not need to submit a tax return if they are below the £150,000 threshold and the only income they receive is paid via the umbrella company as it is taxed at source (PAYE). Our latest article explains more about umbrella companies and tax returns – to help you identify whether or not you need to submit one.
Umbrella company contractors and PAYE
Umbrella companies process payroll using HMRC’s tax system—Pay As You Earn (PAYE). Therefore, contractors using an umbrella company are taxed at source and paid a net salary after the umbrella company processes all deductions and sends them to HMRC.
If your only source of income is paid via an umbrella company and is below the £150,000 threshold (before tax), you will not likely need to file a self-assessment tax return. However, if you receive any additional sources of income or are above the £150,000 threshold, you may need to submit a tax return to HMRC for the appropriate tax year.
When do contractors using an umbrella company need to submit a tax return?
Despite being paid for your temporary assignments through an umbrella company, you may be required to submit a self-assessment tax return for the tax year the 6th of April 2023 to the 5th of April 2024 if any of the following apply:
- If you had an annual income of £150,000 or more before tax
- You had to pay the High Income Child Benefit Charge
- You are a higher or additional rate taxpayer and make contributions to a pension scheme
- You’re a limited company director and receive income not taxed via PAYE
- You earn money from renting out properties such as buy-to-let
- You have income from trusts or settlements
- You receive money from dividends, investments or savings
- You have sources of foreign income that are subjected to UK taxes
- You were self-employed as a sole trader and earned more than £1,000 (before taking off anything you can claim tax relief on)
- You had to pay Capital Gains Tax when you disposed of or sold something that increased in value
- You receive any other form on untaxed income specified by HMRC
Please visit the government’s website if you are unsure whether you need to submit a tax return.
What is the deadline for filing a self-assessment tax return?
If you need to file a tax return and have not sent one before, you must tell HMRC by the 5th of October that you need to complete one by registering for self-assessment. The deadline for submitting a paper tax return is the 31st of October or the 31st of January if you’re submitting a return online.
What happens if you miss the deadline?
You’ll get a penalty if you miss the filing deadline or pay your tax bill late. If your tax return is up to 3 months late, you’ll pay a late filing penalty of £100, increasing the later you file it or pay your tax bill late. You’ll also be charged interest on late tax bill payments.
What is the deadline for paying your tax bill?
The tax you owe must be paid by midnight on the 31st of January. There is also a second payment deadline on the 31st of July if you make payments on account which are advance payments towards your bill.
How to register for self-assessment and file a tax return?
You can register for self-assessment online via the government’s website. Once registered, you’ll be sent a Unique Taxpayer Reference (UTR) by post within 15 days. This can take longer if you live overseas. When you receive your UTR, the letter will contain information on how to set up your Government Gateway account. You will need to set up a Government Gateway account to submit your tax return online. Using your UTR, you can then log in to your Government Gateway account and submit a self-assessment tax return online.
Appoint an expert accountant to complete your tax return
Our sister company, Churchill Knight & Associates Ltd, has a dedicated in-house self-assessment tax return department that can complete your tax return and ensure it is filed to HMRC accurately and on time. Their expert team will provide ongoing support, advise you of your tax liability or rebate amount, and suggest ways to legally reduce your tax liability.
If you have any questions about submitting a self-assessment tax return or are interested in having our sister company complete it for you, please complete the short form on our website to arrange a consultation.
Umbrella Company UK
Umbrella Company UK is an FCSA-accredited and SafeRec-certified umbrella company offering a compliant payroll service to contractors and freelancers in the UK. There are many benefits of using Umbrella Company UK for your payroll, including:
- Quick registration process – You can register over the phone or online in a matter of minutes.
- A comprehensive insurance package – £10 million Public Liability Insurance, £10 million Employers Liability Insurance, and £5 million Professional Indemnity Insurance.
- Dedicated Onboarding and Customer Service Teams – Who will provide support throughout your time with Umbrella Company UK and answer any questions you may have.
- No tie-in period – There are no joining or leaving fees when you use our umbrella service, and you can use Umbrella Company UK for all your temporary assignments.
- Employee benefits – Including Maternity Pay, Paternity Pay and Sick Pay.
- Minimal ongoing administration – If required, you only need to submit a timesheet each time you are due to be paid.
- Access to My Digital—Our online portal and app allows you to easily submit the hours you’ve worked and view payslips.
- Salary sacrifice service – Our salary sacrifice service is an excellent way to boost your personal pension pot and save tax-efficiently for retirement.
Do you have any questions about our umbrella service? Contact us for a free consultation by calling 01707 669023 or request a tailored take-home pay illustration via our website.
