2 jobs - [Sole Trader] and [Umbrella Company employee] - conflict?

gavynn

Hi everyone.
I'm looking to change job. If I go via an agency. it seems I may have to sign up to an umbrella company.
I am also planning to be a sole trader with my own business .
Question is, are these things compatable at the same time? 

(I dont really understand umbrella companies apart from a way to make the person working have to pay to be paid, or have i got that wrong? maybe a queston for another time.)

Thanks

Gavin

tacpot12

They are compatible, you can be an employee and self-employed at the same time. 

Sandtree

gavynn said:

I dont really understand umbrella companies apart from a way to make the person working have to pay to be paid, or have i got that wrong? maybe a queston for another time.

Umbrella companies came into their own with the introduction of IR35 and the off payroll working regulations... government wanted those that act like an employee to be taxed as an employee but employers didn't want the faff of taking on employees for short term engagements.

Hence the umbrella came to the rescue, they employ the person saving the end client having to do so and as such all monies are paid via PAYE as the government wants. The issue is the only money coming into the business is your £X a day/hr and therefore this monies has to cover the administration costs as well as employers NI, employers pension contributions etc.

From a tax point of view, its perfectly fine to be an employee and self employed at the same time, just need to complete the relevant sections for both on your self assessment. Where you may have issues is that your client may not allow you to have secondary work or may restrict it depending on its nature. As you are going via an umbrella this level of control is acceptable inside IR35. 

TripleH

I know I had a very short-term contract via an umbrella company. The apprentice levy you pay was a shock (you are one of many employees).

The other issue was the recruitment agency held onto my last payment for over a month. Whilst the money wasn't urgently required, it took me into a new tax year and created a mess that took 3 years to resolve with HMRC. So exit issues can be an issue.