Advice on using an umbrella company please

SugarandSpice

Hi ya,

I'm wondering if anyone uses an umbrella company to work part-time? I've recently started a short-term project for a company who can't employ me permanently, they use an agency which I am not qualified to be employed by. They will pay me but have advised I use an umbrella company to be self-employed instead of registering myself as a Limited Co...

This is something I haven't come across before as I have always been PAYE. I'm going to phone a couple of the umbrella co's and ask questions but I'd like to have some sort of knowledge under my belt.

Does anyone have any experience in this and if so, can you offer me any advice?

paddyrg

The umbrella company will take a fee (say £75/month) then divide the balance to pay your taxes and NI and pay you PAYE. The umbrella company will be your employer.

Mistral001

I would just go through the agency. It will mean the company will have to pay the agency fee, but then again there are costs to you in setting up a company or working for the umbrella company.

System

See the original post, the agency will not act as an employer so the options are Ltd, umbrella or possibly self-employed.

franklally

You may find that through an umbrella company you will be paying both your personal and the employers national insurance contributions - 25% in total

System

There is no 'may'. They WILL take employer NI from your income.

johnmcga

I've done both, although it's a long time since I used an umbrella company.

As a general rule, umbrella companies are quick and convenient, with fewer ongoing obligations for you to deal with. However, they can cost you significantly more.

If this truly is a short-term project and you're planning to find a permanent, full-time job once this contract is over then I would lean towards an umbrella company.

However, if you expect this to be the first stage on a journey of freelancing / contracting, setting up a limited company may be a better bet.

If I were in your position, I would speak to a local accountant. Explain your position and ask them to provide an estimate for how much tax you might pay and how much they would charge for their services.

Then you can compare these with the umbrella company costs to decide if it's worth setting up your own company.

Good luck!

InsideInsurance

SugarandSpice wrote: »

They will pay me but have advised I use an umbrella company to be self-employed instead of registering myself as a Limited Co...

This is something I haven't come across before as I have always been PAYE. I'm going to phone a couple of the umbrella co's and ask questions but I'd like to have some sort of knowledge under my belt.

Does anyone have any experience in this and if so, can you offer me any advice?

99.9% of the time with umbrellas you are not self employed but are an employee of the umbrella. You will be PAYE with the umbrella as your employer.

Whatever rate you have agreed will be the rate the umbrella is paid, from that they have to deduct their fee, income tax, employee and employers NI etc to calculate what you get paid. You may get certain options like having paid holidays or having your holiday money paid inline with your normal salary and thus holidays are unpaid.

On the plus side because you technically work for the umbrella and are only temporarily on site with their client etc then you can get relief on expenses like commuting etc which you wouldnt normally be able to as an employee

SugarandSpice

Thanks everyone for your input. I feel like I have a clearer idea on what questions to ask etc....

rosie2424

Hi
In answer to your question I have been using an umbrella comp for the last couple of months and I seem to be paying a lot less in tax and receiving more pay even with all the charges / additional tax? The downside is I get no leave for time off so have to make up my hours.

I have a similar question though that I hope someone can help with - I currently offset my tax with £8 for lunch when I work more than 5 hours and £19 for evening meal when I work over 10 hours. Does anyone know how best to use this ie how much should I spend on lunch / evening meal to get the best from my tax relief before it actually costs me money to buy something. At the mo my lunch is usually under £1.50 and eve meal under £2.50.

Thank you

InsideInsurance

rosie2424 wrote: »

I have a similar question though that I hope someone can help with - I currently offset my tax with £8 for lunch when I work more than 5 hours and £19 for evening meal when I work over 10 hours. Does anyone know how best to use this ie how much should I spend on lunch / evening meal to get the best from my tax relief before it actually costs me money to buy something. At the mo my lunch is usually under £1.50 and eve meal under £2.50.

The amount you can actually claim is the actual cost. A former colleague got unstuck when their umbrella asked them for all the receipts over the last ~18 months or so when they had been claiming £10 every day for lunch despite spending nothing (sandwiches from home) most the time.

People claim there are rules of thumb that HMRC may use to decide who is worth investigating, £10 is the urban myth for lunch, but certainly isnt the case from my contacts in HMRC.

If anyone tells you that you can claim anything other than at cost then get them to give it you in writing and signed so you can sue them if HMRC comes after you for tax fraud.