Unethical umbrella schemes have become more prominent as a result of the IR35 reforms. Contractors who do not have a good understanding of tax law are being enticed by umbrella companies offering high rates of take home pay. But with so many payroll services available, how do you know which companies are compliant and safe to use?
As a contractor, it is vital that you use a HMRC-complaint accountant or an umbrella company to ensure you pay the correct Income Tax and National Insurance Contributions. Industry bodies such as Professional Passport ensure the service meets the regulatory standards.
Follow the guidelines below when choosing a contractor accountant or payroll provider:
- Check they have a good reputation within the industry and are owned by professionals with plenty of experience.
- Ask yourself do they offer realistic take-home pay.
- Are they are industry experts and can provide you with important information about how to legally comply with UK tax laws?
- Do they have a 100% compliance record with HMRC and have not been assigned a Scheme Reference Number (SRN)?
- Do they do not try and convince you to claim excessive expenses.
- Are all of their activities take place in the UK?
- Do they work with other companies in the industry who have a positive reputation, such as insurance providers and advisors?
- Do they have written content on their blog articles and website which clearly explain the risks of tax avoidance.
Your salary is paid via a PAYE, which means you can expect to retain 60-70% of your earnings after the required deductions have been made. Income Tax is applied at either a basic rate (20%), higher rate (40%), or additional rate (45%) on all income you receive above the personal threshold. NICs are payable on all earnings above £162 per week- at 12%. This means you should take home as much of your pay as a standard employee, minus the umbrella margin for processing payroll and dealing with the administration. Your umbrella company will send you a payslip, similar to a permanent employee, allowing you to see the deductions that have been made and the amount you are due to receive.
Using Umbrella Company UK’s PAYE umbrella is the easiest and most hassle-free way for contractors and freelancers to get paid. We’re backed by 20 years’ experience in contractor accountancy and umbrella payroll. You can rest assured that we are 100% HMRC compliant and we have never, and will never, promote an offshore tax avoidance scheme.
Would you like to find out more about how we can take care of your payroll? If you would like a free and impartial consultation with our specialists (to discuss whether an umbrella company is right for you), please give us a call on 01707 669023 or fill out the form on this page.