Self employed or umberella company?

daisyrose

o/h works for an agency who changed him from paye to an umberella company.They tell us that he will keep more of his earnings this way but we cant understand the payslips and compare earnings on umberella to the same hours on paye and he seems to earn less paid under umberella.
He is thinking of going self employed as an alternative, I have looked into this and it seems there are pros and cons with both.

If he works for an agency as self employed does he need public liability insurance? Is it a complicated process for someone who has always been paye and is now in his late 50's and is there anything else he needs to do?

Put another way I would appreciate views /comments from anyone paid either way. We just don't know what to do and he needs to work. Also how do you choose a good umberella company?

All responses would be very much appreciated this is all new to us and so far the experience with an umberella company has not been good.

Thank you in advance.

directdebiter

Hi. Umbrella Companies should be very transparent and easy to use. If you want minimal fuss I would suggest using an Umbrella Company. There is lots of independant useful information on Umbrella Companies here
Am sure this would be useful. Self employed is fine but means sorting your tax out yourself. I have used Umbrella Companies such as contractorumbrella and Parasol - worth speaking to and getting their advice. HTH.

Prothet_of_Doom

I hate the idea of umbrellor companies on principle, but for short term contract work for someone who wants to go permanent, they work.

I went ltd company from the off, because I wasn't prepared to share my income for no reason. Yes it's more complicated doing it this way, and I have to pay an accountant, but think about this:

The umbrellor will charge VAT to the client (husband's agency), and husband will put in expences claims, which the umbrellor will claim back the VAT from HMRC. So in addition to the monthly management fee, they would make £100 a month off me from the VAT.

InsideInsurance

daisyrose wrote: »

He is thinking of going self employed as an alternative, I have looked into this and it seems there are pros and cons with both.

If he works for an agency as self employed does he need public liability insurance? Is it a complicated process for someone who has always been paye and is now in his late 50's and is there anything else he needs to do?

Do you actually mean self employed (ie a sole trader) or do you mean a limited company? Due to potential HMRC issues for the client/ "employer" many wont take a contractor whos a sole trader.

Depending on what he does for a living he may need Public Liability and/or Professional Indemnity, if it is necessary they can be bought as a package together. The one complexity of PI is that unlike say Motor insurance the policy covers claims made during the period of the policy not for incidents that happen during the time. So if you cancel the policy after finishing with the client but the client then sues you for bad work 6 months later you wont have any protection - so really you should budget keeping PI cover for 12 months or longer afterwards (full belts and braces would be another 6 years)

You can buy high quality cover and you can buy absolute rubbish. If the contract requires you to hold insurance but you arent worried about being sued then buy the rubbish cover that ticks the box. If you fear a real claim then obviously pay more for better cover.

When I switched to contracting/ consulting I went straight to a limited company because the tax efficiency were much more than via an umbrella. Certainly I required PI cover and PL is only $25 a year add on to the PI cover

Prothet_of_Doom

What InsideInsurance said: yeah but no but.

If you own a ltd company and it costs about £35 to set up, that's all you can loose, if you are sued for blindingly incompetant work, which is why I'd rather be ltd than self employed. my Ltd company is vicariously liable for any mistakes I might make as both employee and director, so whilst my client may insist I'm insured for Professional Indemnity in reality that's for his not my benefit.

And yeah I've not seen a client who would deal with a none ltd or none umbrellor'd contractor.

IR35 Risks and all that