Agency staff earn more through Umbrella Companies?

gavynn

My full question is: Do agency staff earn more through umbrella companies than via PAYE direct from Agency?

An Agency I signed up with said I have a choice. But apparently agency staff usually get more money in their account when paid via umbrella companies than if they were paid by the Agency (even taking off the extra percentage cut the Umbrella Company charges) - but I don't quite get why or how I'd get more?
Is that for expenses, what if I had no expenses?

Just confused

Thanks

bugslet

Is there any difference in pension, sick pay and holiday pay?

JReacher1

I imagine it's because umbrella companies will offset anything you spend on a working day like travel, food etc. Against your tax bill as a working expense which means you pay less tax than if you were going directly through an agency.

[Deleted User]

Be very careful if you go down the umbrella company route as IR35 (HMRC rules on avoiding paying tax by claiming you are a LTD company when in fact you are really an individual working for one company) can apply.

If you are working through a legitimate agency who is using PAYE for your tax and NI you should be ok though.

dawyldthing

It reduces your tax bill. But it doesn't help sometimes like it didn't help me as you don't get all the tax back and it's worked do they make a bit as one year I only worked part the year but lost out a lot due to signing up to the umberella company. The only problem is some agencies insist on it (no doubt target based) to make more money

Expat2016

Rather than use an umbrella company, I would just pay the small fee to set up a LTD company and manage that yourself instead of paying an umbrella firm to do it for you. And with you being the only employee of your LTD company, it would be pretty simple to manage.

You can set a LTD company up the same day now for less than £30.

agrinnall

Expat2016 wrote: »

Rather than use an umbrella company, I would just pay the small fee to set up a LTD company and manage that yourself instead of paying an umbrella firm to do it for you. And with you being the only employee of your LTD company, it would be pretty simple to manage.

You can set a LTD company up the same day now for less than £30.

I would too if the rate being paid was high enough to justify it. However, what the OP has to understand is that running a limited company comes with a set of responsibilities, with penalties if they are not adhered to - PAYE submission, corporation tax return, potentially personal tax return, if things go well VAT registration, liability insurance, etc, etc.

paddyrg

Plus the costs of an annual return for a limited company will be several hundred quid on top of the tax and NI and real time reporting/payroll overheads. People jump into limited companies too readily without appreciating the implications.

OP, it's usually marginal at best, umbrella companies are effectively outsourced payroll, and that makes the payroll cost yours instead of the agency's. You'll also have deductions for both employers and employees NI, "holiday", etc. You also lose any access to sick pay, maternity, etc. You're also very likely to fall within IR35, meaning you could be in a worse position. You are unlikely to be able to claim all expenses, indeed probably very few will qualify. Attempting to expense lunch or travel to your usual place of work will likely just lead to tax on those as benefits.

gavynn

So if an agency pays me directly I should get more money?
If I go through an Umbrella, more of my money is taken and I get less pay?
But if I claim expenses I might get some back? (I thought there were some kinda rule changes about that and im not clear what or how to claim anyway)