What are the benefits of working through an umbrella company?
As an umbrella company contractor, you will have many of the benefits that come with self-employment, as well as some of the security that comes with permanent employment.
These include:
Flexibility
A better work-life balance is something that the majority of us strive for and this is most definitely a driving factor for many people when it comes to self-employment.
As a contractor, you will have the freedom to pick and choose when you work.
Being entitled to standard employee benefits
Unlike sole traders and limited company contractors, umbrella contractors are entitled to statutory maternity/paternity and sick pay, as well as annual leave.
Not having to worry about completing a self-assessment tax return
Sole traders and limited company contractors will need to file all of their financial information and pay for owed tax on an annual basis before the 31st of January of each year.
As an umbrella company contractor, this is all sorted for you by your umbrella company – they will provide you with a payslip, deducting any income tax or National Insurance Contributions (NICs).
Umbrella take home pay
An umbrella company is essentially the middle man between the contractor and their client; the umbrella employs a temporary worker on behalf of an employment agency and the agency will then provide the services of the worker to their clients.
There are certain costs that come with working through an umbrella company, as well as other taxes, levies and deductions, such as:
- The umbrella’s margin
- PAYE tax
- National Insurance
- Employer’s National Insurance
- The Apprenticeship Levy
- Pension payments
- Holiday pay deductions
- Student loan repayments
As a result of this, umbrella company contractors can expect to take home around 60-65% of their contract income, depending on their rate.
For more information on this, read our Limited and Umbrella Take Home Pay page.
If you’re unsure whether you should be working through an umbrella or a limited company, then take our questionnaire on our Limited or Umbrella? page.
If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100, email jaime.thorpe@dolanaccountancy.com or contact us via live chat.
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