Umbrella Company FAQs

You can upload your signed timesheets to the Umbrella Company UK app or our online portal.

You can access your payslip via our online portal or on the Umbrella Company UK app.

Umbrella Company UK is often used by contractors who:

• Are earning £15 or less per hour
• Are contracting for the first time and are unsure if it will be a permanent move
• Work on short-term assignments of 3 months or less
• Prefer a hands-off approach to payroll and minimal ongoing administration
• Cannot become a director or do not want to become a director of their own limited company
• Are caught by IR35 and can no longer operate through their own limited company

We use same day faster payments which means as soon as we receive funds from your recruitment agency, we will pay you the same day. This is on average two to three days faster than other umbrella companies.

If you are an existing client of ours and would like to speak to one of the team please give us a call on 01707 669038. If you are not a client of ours and have a query, please give us a call on 01707 669023 and a member of our team will be happy to answer your questions.

Via our app you can do the following:

• Submit your signed timesheets.
• View your payslips and payroll history.
• Access your P60 and P45 documents.
• And much more!

Via the online portal you can do the following:

• Submit your signed timesheets.
• View your payslips and payroll history.
• Access your P60 and P45 documents.
• And much more!

An umbrella company is a PAYE payroll service for contractors and freelancers. The umbrella company acts as an ’employer’ on behalf of its contractor employees and will raise invices, process timesheets and then pay the employee after the relevant tax and National Insurance deductions have been made.

An umbrella company’s principle focus is to employ and process payment for contractors and freelancers working on temporary contracts. The umbrella company will invoice the contractors recruitment agency or end client for the hours they have worked.

Once they have received funds, the umbrella company will deduct the Apprenticeship Levy, Employer’s NI, umbrella margin and any pension contributions. The money left over is referred to as ‘Gross Salary’.

In compliance with UK tax law the Gross Salary will then have Income Tax and Employee’s NI deducted and the remaining net salary will be paid into the contractors bank account.

When you work through an umbrella company you become an employee of that company. This ensures all of your payroll processing and invoicing, insurance, employment rights and tax deductions are fully taken care of.

Most UK based umbrella companies are compliant with UK tax law and HMRC legislation. However, you should be aware that there are some umbrella companies which are advertising tax avoidance schemes and do not deduct the correct amount of tax and National Insurance.

Before signing up to an umbrella company, check that they operate in full compliance with UK tax law and HMRC’s legislation. Look for an umbrella company with an industry accreditation from Professional Passport or FCSA as their processes will have to be regularly audited and they have adhere to strict codes of conduct.

Umbrella companies are suitable for contractors and freelancers from any industry, level of experience or job title. Contractors often use umbrella companies if they satisfy any of the following:

• They receive an hourly rate of £15 or less
• They are working on a short-term contractor of 3 months or less
• They are trying out contract work and are unsure if they will move to contracting permanently
• They are caught by IR35 legislation

If you are caught by IR35 for a single assignment but will continue to operate outside of IR35 for the rest of your assignmentsl; it is advised that are paid through your limited company for that assignment with the tax already deducted.

However, if you need to use an umbrella company for a few assignments, it is possible to keep your limited company. Your limited company will become dormant and you will be paid through an umbrella company instead of your limited company.

It is strongly advised that you use a UK based, compliant umbrella for your payroll. If you are found by HMRC to be using an offshore intermediary promoting a tax avoidance scheme you could incur significant penalties and you will be required to pay back all the tax they believe you owe.

If you have any additional sources of income that are not taxed at source, you will need to report it in a self-assessment tax return. Additional sources of income can include:

• Rent or income from properties in the UK above the £1,000 threshold
• If your income exceeds £50,000 and you or your partner are entitled to receive Child Benefit you may need to complete a self-assessment as tax may be due
• Foreign income above the £2,000 threshold
• Income from any savings accounts or investments
• Income from a trust, settlement or trust or inherit an estate
• If you have sold or given away an investment or property (depending on how long the asset was owned and the gain that you made)

Our sister company, Churchill Knight & Associates Ltd, has an expert personal tax department who will take care of everything on your behalf. Click here to find out more.

Joining an umbrella company is incredibly simple. Simply give one of their consultants a call and you can be signed up over the phone in minutes. Most umbrella companies will also have an online registration form which you can complete if you are unable to arrange a call.

This all depends on the umbrella company as some will charge a joining fee and others will not. Always check before you sign-up!

Umbrella companies require the following information when you join:

• Your full name as shown on your passport
• Your preferred title
• Your date of birth
• Your home address
• Your preferred contact number
• Your email address which you would like any communication sent to
• Your passport/ID number and the country of issue
• Your National Insurance Number and National Insurance Code
• Your tax code
• Your bank/building society name
• Your bank account number and sort code
• The start date of your contract
• The hourly or day rate for your contract
• Any student loan information (if applicable)

You will need to provide a form of ID such as your drivers licence, naitonal ID card or passport, and a proof of address. You will also need to supply evidence of your tax code via a P45 and proof of previous earnings.

If you are a non-EU national, additional documents may be required.

Once you have sent us over all the relevant documents to complete the sign up process, the only ongoing administration they will require is your signed timesheets.

When you want to leave or your contract has ended, notify your umbrella company of your intention to leave and they will issue you with your P45. Some umbrella companies may charge a small fee to leave so it is always worth checking your contract before you do.

This depends on your umbrella company as some will charge you an exit fee and others will not.

Your umbrella company will make the relevant deductions and pay your net salary directly into your bank account.

If you are an Umbrella Company UK employee you will receive a text notification alerting you that your payment has been processed and paid into your bank account.

As an umbrella employee you can expect the following deductions: Employer’s and Employee’s National Insurance, Income Tax, Apprenticeship Levy and pension contributions (if you are paying into a pension scheme).

Your payslip will also show a deduction for Holiday Pay. Please be aware that this is not deducted it is simply a reallocation of your pay as it is a legal requirement for umbrella companies to show they are paying you Holiday Pay. It will only be deducted if you request that it is held back and accrued to be paid as a lump sum at a later date.

For more information about umbrella company payslip deductions please visit our blog.

You will receive a payslip every time we pay you. As soon as you have been payed you will be able to view and download your payslip via the app or portal.

You will receive a text notification alerting you that you have been paid.

Holiday Pay is worked out at 25% of your hourly rate and is shown on your payslip as a payment. Most contractors choose to have it paid to them each week or month along with the rest of their salary. You can request your Holiday Pay to be held back and paid as a lump sum at a later date if you would prefer.

You can change the way your Holiday Pay is paid to you – simply notify your umbrella company.

It is a legal requirement for umbrella companies to enrol their workers into a workplace pension. If you have your own arrangements in place or do not want to use their pension scheme you have the option to opt out.

It is a levy on UK employers to fund new apprenticeships and apprenticeship training. The levy is calculated at 0.5% of salary payments made.

Your company is your employer and by law must pay employment costs (Apprenticeship Levy and Employer’s NI). However, as they do not benefit from the work you do this deduction is passed onto you. These additional costs should be factored into your salary rate so you are not left out of pocket.

If you get paid via PAYE, Income Tax and Employee’s National Insurance will be due on all your earnings. When you work through an umbrella company you will also see a deduction for Employer’s NI.

Even though the umbrella company is seen as your employer (for tax purposes), they do not benefit from any of the work you do and will not pay Employer’s NI. Equally, your client (who you carry out the work for) is not your employer and will also not pay the Employer’s NI. Therefore, the Employer’s NI is passed onto you.

The illustration may differ slightly to your actual take home pay as umbrella companies do not have your exact tax code until you sign up. The illustration is only an estimation and should only be used as a guidline.

Your payslip will show that you are being paid a salary and bonus. You are not actually receiving a bonus, it is simply the way umbrella companies have to present the payslip to show to HMRC that they are paying you at least minumim wage.

The number of hours that you have worked will be shown against the minimum wage rate for your age and then all other funds will be shown as a bonus.

All other funds that are due to you for that working week/month are shown as a bonus after you have been paid the minimum wage rate.

For example: if you are over 25 years old the 2019/20 National Minimum Wage is £8.21 per hour. If you earn £9.25 per hour for a contract role the additional £1.04 is shown as a bonus.

If you think you are paying too much tax or your tax code is wrong you should contact HMRC immediately to query it. You can do this by calling 0300 200 3300.

If you think you have over paide tax or are due a rebate you should contact HMRC to discuss it. The number to call is 0300 200 3300 and you will need to have you PAYE reference and NI number in front of you.

Once your umbrella company has receive funds from your recruitment agency or end client they will process your pay and pay you into your personal bank account.

If you are an Umbrella Company UK employee we operate Same Day Faster Payments. This means that as soon as we receive funds from your recruitment agency or end client you will be paid the same day. Please be aware it can take until 5.30pm that day.

You can work for as many recruitment agencies as you like! When you beocme an employee of an umbrella company you will be seen as one employee even if you are working on mutliple contracts for multiple recruitment agencies. Don’t worry – your tax code won’t be negatively affected and you won’t receive a massive tax bill.

You should always check with your recruitment agency as they may have a strict list of umbrella companies that you can use which have been thoroughly audited to ensure they are compliant.

Recruitment agencies will often recommend their candidates work via an umbrella company because they can offer additional extras which will benefit you. This includes free insurance cover, access to employee benefits and employee reward schemes.

Yes – your umbrella company may need to send over compliance documents and a contract to your new client.

Whilst many contractors work through an umbrella company, you can choose to work directly with end clients if you prefer.

Most compliant umbrella companies will offer their employees a comprehensive insurance package which should include the following insurances as standard: Employer’s Liability, Public Liability and Professional Indemnity.

As an Umbrella Company UK employee you will receive £10 million Employer’s Liability insurance, £10 million Public Liability insurance and £5 million Professional Indemnity Insurance.

Employer’s Liability Insurance protects you against the cost of compensation claims if you become ill or injured.

Professional Indemnity Insurance protects you and the umbrella company if someone makes a claim against you in regards to your work. This could include not fulfilling the terms of your contract, completing the work to a poor standard and giving inaccurate advice that causes damage.

Public Liability Insurance covers you and the umbrella company if something you do whilst you are working on your assignment casuses injury or loss to a coleague or a member of the public.

IR35, or off-payroll as it is now referred to, came into effect in April 2000. It was introduced as a way to stop workers cliaming tax benefits via intermediaries (limited companies) when they would otherwise be deemd an employee if the intermediary were not used. If you are deemed inside IR35 you must pay tax and National Insurance – similarly to permanent employees.

If you are working in the public sector your end client will assess your IR35 status and you will likely be deemed inside IR35 due to the nature of public sector work. The best payroll option in the public sector is to use an umbrella company or agency PAYE.

Currently, if you are working in the private sector you can assess your own status and be paid via your own limited company. However, from April 2020 off-payroll in the private sector is being rolled out and your end client will make the assesment. Similarly to the public sector, if you are inside you will be required to pay tax and NI. If you are genuinely outside, then you can continue to pay yourself via your limited company through a combination of salary and dividends.

For more information about IR35 and the latest updates, please visit our IR35 Information page.

The Loan Charge is a retrospective tax that applies to contractors and freelancers who used disguised remuneration schemes. These schemes claimed that contractors who used them did not have to pay the correct amount of Income Tax or National Insurance on their earnings – this was not the case and the schemes were in fact promoting tax avoidance.

The Loan Charge means HMRC can recoup missing tax as far back as 1999 and can demand all the missing tax to be repaid.

Umbrella companies are a compliant payroll service (PAYE) for contractors and freelancers. However, be careful when selecting an umbrella company, because unfortunately, there are some non-compliant providers out there. Providing you choose a compliant provider – you have absolutely nothing to worry about!

Compliant umbrella companies will ensure you pay the correct tax and National Insurance Contributions, and this will protect you from any unexpected HMRC tax investigations in the future. Non-compliant umbrella companies are unlikely to operate in your best interest, and as a result, you may underpay tax and National Insurance. In the long run, this could have devasting consequences.

Tax avoidance is technically legal, but don’t let this tempt you into using a tax avoidance scheme. Just because a scheme is legal now, it doesn’t protect you from HMRC investigations down the line. Did you know that HMRC can retrospectively punish you for using tax avoidance schemes and you could face a huge tax bill at some point in the future? It’s true. Tax avoidance schemes will try and convince you that using them is a good idea but don’t be misled!

There are multiple checks you can do to find out if an umbrella company is compliant.

Firstly, do they have a proven track record? Have a look and see if they’re have been around for a few years and if they have built a well-respected reputation within the industry. If they’re fairly new on the scene – this isn’t a bad thing. However, keep reading.

Secondly, are they accredited by a well-respected industry body?

Thirdly, you want to make sure an umbrella company is advertising the fact they operate a PAYE payroll model. As a UK tax payer, you are required to pay tax and National Insurance Contributions. Therefore, if an umbrella company is advertising something else and offering you the chance to avoid these payments (or pay less tax), you must avoid them.

The Freelancer & Contractor Services Association (FCSA) is the UK’s leading professional body and they are committed to ensuring the supply chain of temporary workers is compliant and ethical. In order to achieve such an accreditation, an umbrella company has to be able to prove all of their internal processes and procedures are compliant with HMRC’s rules and regulations.

In order to achieve FCSA accreditation, contractor accountants and umbrella companies must prove that they “adhere to rigorous standards”. Each company is “assesses against a published Code of Conduct”, are “independently tested by regulated accountants and solicitors” and are required to prove their continued compliance every year.

For more information, please visit the FCSA’s website.

Yes. Umbrella Company UK is accredited by the FCSA and we believe this is the best way to showcase our commitment to compliance within our sector.

For more information on Umbrella Company UK’s FCSA accreditation, please click here.

Yes, both Bluebird Accountancy and Churchill Knight & Associates Ltd are accredited by the FCSA too.