New contractor role - umbrella company please help

MoneySavingMission

Hello
I have been offered a contracting role post redundancy from prev perm role. Don't know much about contracting other than i have to choose a firm to operate this contracting operation through.

* I will be paid a daily rate. Are you entitled to any kind of holiday pay when you are in a contracting role?
* How much approx do umbrella companies charge?
* I understand there are contracting fees which can be offset against tax liability. Travel, Lunch,Accomodation, Elec Equipment. What are the others? How does this work? E.g. My train fare is £100 a week, can I claim back the tax % of this or do they add to personal allowance before they can deduct tax?

Please help me gain a quick insight into this new world!

scheming_gypsy

I use Paystream.

Each week I send my timesheet and expenses through to them. At the minute I'm only claiming £30 a week for food but if i was claiming petrol I'd have to submit travel expenses and receipts.
They charge me £25 per week / invoice. They deduct that and employers NI, then they deduct calculate my wage made up of basic pay, commission and holiday pay (which is pretty much what's left minus any expenses) and deduct tax and NI and add the expenses back on, and that's my take home.

You don't get holiday pay as you're getting paid more - so your holiday pay is pretty much added onto your weekly wage instead.


Wage breakdown example for last week - bearing in mind Monday was a bank holiday and I was also off on Friday.

Umbrella income - £440.40

Deductions
Employers NI - £29.27
Fees - £25
Employee income - £390.13 made up of
Gross pay - £360.13
Expenses - £30

Gross pay = £360.13 made up of
Basic Pay - 170.23
Commission - 151.12
Holiday pay - 38.78

Deductions
PAYE - £35.60
NI - £25.33

Net pay = £290.20
+ Expenses of £30 = take home of £329.20

MoneySavingMission

Is £25 per week a common umbrella company charge?

This is a minefield and I need to find out today so please if anybody can shed any light please help.

My only expenses will be weekly train pass for commute (approx £80) Will I be able to claim this back in full or only partially? What other legitimate expenses can I claim e.g. Lunches etc. I will not require accomodation.

makeyourdaddyproud

Yes, mine was £23. So that rate is market norm.

Umbrella is the best vehicle for contractors where the future of continual work is uncertain, so you are in good hands by the sound of it.

Dan

scheming_gypsy

With Paystream i can claim £5 if i'm out of the house for under 10 hours or £10 if i'm out for over 10 hours. Can also claim for breakfast if I'm out before 6am.

paddyrg

Few things...

1) How can your role be made redundant then brought back on contract - there may be a significant legal point here as the role clearly isn't redundant.

2) Umbrella - allow a grand or so a year in fees/costs.

3) Deductibles - this is for you to discuss with the umbrella company, some will allow different deductibles than others depending on their degree of confidence that they're genuinely business expenses. Generally, things that are additional out of pocket expenses are deductible, this would not normally include lunch at your regular place of work, or even commuting trains. If you're sent to Peru for a meeting, then that travel and meals will be deductible (or reclaimed as expenses).

4) Holiday - yes and no. You're not employed by the company so they have zero responsibilities towards your holiday/pension/sick pay etc. However you are employed by the umbrella company, so they have to manage a provision for those statutory elements...out of your own money.

5) IR35 - not sure how or even if this applies to umbrella companies, but it is a corner of employment/tax that you will hear about.

scheming_gypsy

i think then redundancy was from their last job and not going back into it as a contractor.

You're classed as an employee of the umbrella company so i don't think IR35 comes into it.

gettingready

Do you have to use an umbrella company?

You would be better off if you registered Ltd.

makeyourdaddyproud

gettingready wrote: »

Do you have to use an umbrella company?

You would be better off if you registered Ltd.

No. He's a contractor - not employing a team of workers to do his own work. Even so, there is no advantage to a ltd co any longer, especially with ir35.

I just wish people will stop evangelising ltd co's without being in full possession of the facts.

gettingready

Ermmmm - I am a contractor myself, do not employ other people and happily outside IR35 so not quite sure what do you mean?

HappyMJ

makeyourdaddyproud wrote: »

No. He's a contractor - not employing a team of workers to do his own work. Even so, there is no advantage to a ltd co any longer, especially with ir35.

I just wish people will stop evangelising ltd co's without being in full possession of the facts.

Even within IR35 almost everyone contracting would be better off. Think about the VAT. You could charge the client 20% VAT and only pass on maybe no more than 14.5% of turnover if registered for the FRS. The extra £2.60 per £100 will easily cover the costs.