Is it worth using an Umbrella on low day rate?

ktb

My OH has been offered a 6 month contract on £100 a day (no expenses). This is his first experience of contracting.

The recruitment agency suggested using an umbrella agency, but as his rate is pretty low as contracting goes, the % they charge makes a bit of an impact, which being MSE about it, we could do without!

I have no idea what he would be required to do himself, if he doesn't use an umbrella scheme? I realise it would at least be tax & NI, but not how he does this or if there is more? Is anyone able to spell out the pros/cons and let me know what he would have to do, if he decides against using one? Or, is using one worth it, regardless?

Thanks in advance for any advice!

Notmyrealname

It is never ever worth using an umbrella company, especially on a low rate. They charge far more than accountants do, something in the order of ten times as much, for something most people are perfectly capable of doing themselves.

ktb

Thanks for your response Notmyrealname - instinctively I thought that was probably the case. I just havent come across contracting before and wanted to see if I was missing something. Thanks!

Notmyrealname

Book an appointment with a tax accountant to discuss the best options. If you keep paperwork in good order it is possible to get an accountant to do your annual books for a few hundred quid. The people who get the expensive bills are those who hand over a carrier bag stuffed with receipts and say "sort this".

System

I would check first whether he can be sole trader/self employed for his contract.
In the IT world it is fairly standard that they insist Umbrella/Ltd Co/PAYE. Self employed/sole trader not being an option.

Notmyrealname

!!!!!! wrote: »

In the IT world it is fairly standard that they insist Umbrella/Ltd Co/PAYE. Self employed/sole trader not being an option.

That is just backside covering so they don't get hit with IR35.

System

Notmyrealname wrote: »

That is just backside covering so they don't get hit with IR35.

And moreso now to distance themselves from the new worker regulations.

In my case ATM my Ltd Co has a contract with the agency who have a contract with the end clients preferred agency. So there are 2 agencies between me and the end client!