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  • Writer's pictureUmbrella Search

First-time guide to using an umbrella company

Updated: Feb 8, 2023

Suppose you are considering using an umbrella company in 2023. In that case, there are several factors to consider, from how an umbrella company works to the benefits of using one.

To help, Umbrella Search has put together this handy guide outlining everything contractors need to know about how to get started with an umbrella company, so you can decide if this is the best move for you this new year.

Get started with an umbrella company today

Contractors will be pleased to know that starting with an umbrella company couldn't be easier. That's why thousands of contractors across the UK opt to work through an umbrella company.

Signing up for an umbrella company is a quick and easy process. Once you've decided which umbrella company to go for, you can begin working with them immediately.

This is why most contractors find the umbrella company route the more straightforward option rather than contracting through a limited company.

What is an umbrella company?

Check what services are on offer

Before signing up with an umbrella company, contractors must first find the best provider. After all, plenty of umbrella companies compete for your attention, so it can be tricky to know which one will be best for your contracting needs.

The first step is to check what services the umbrella company offers. Every umbrella company will provide a basic range of services, including invoicing the client on the contractor's behalf, covering the contractor with the correct levels of insurance, paying the contractor through PAYE, and deducting the proper tax and National Insurance from their salary.

However, every contractor has different needs, so it's essential to ensure your chosen company can help with other things you require, whether you want same-day payments, help with expenses, or guidance on childcare tax credits.

Whatever your specific requirements, ensure your chosen company offers the correct level of services to help elevate your contracting career.

Compare umbrella company fees

The next step to getting started with an umbrella company is to check what fees they charge.

Every umbrella company charges a fee in exchange for the services they offer the contractor. Thankfully, umbrella company fees are competitive and sit at around the £15+ per week. However, ensuring you are getting a fair deal and aren't paying over the odds is essential.

Always check how much the company will charge in fees and whether there are additional costs, such as charges for other benefits.

Make sure PAYE is the best option for you

Contractors operating through an umbrella company will be paid differently from contractors working through a limited company, so it's vital to ensure the PAYE option works for you.

An umbrella company becomes the contractor's employee, which means the contractor is put onto the company's payroll. The umbrella company will collect the fee from the client on the contractor's behalf and process it through the PAYE tax system. This means that the contractor is paying the correct tax and National Insurance, which means one less thing to worry about.

On the contrary, contractors operating through a limited company will be responsible for invoicing the client, chasing late payments, filing for self-assessment, and paying their tax.

Look at expenses

Another thing to look out for when getting started with an umbrella company is how they process expenses. For example, does the umbrella company process your expenses as standard, or will they charge an additional fee for this service?

Contractors will want to take full advantage of claiming expenses as they can receive tax relief. However, HMRC has strict rules about what can be claimed as a legitimate expense which your chosen umbrella company will be able to guide you on.

Understand your statutory rights

When getting started with an umbrella company, the final thing to look at is your statutory rights.

As the umbrella company becomes the contractor's employer, the contractor is entitled to statutory benefits, which include holiday pay, sick pay, maternity leave, paternity leave, and a workplace pension.

Although all umbrella companies will offer these statutory benefits as a minimum, it's essential to find out whether there are opportunities such as buying more holiday pay or contributing more to your workplace pension.

How to find the best umbrella company with Umbrella Search

There are lots to consider when getting started with an umbrella company which is why it's essential to do your research to find the best fit for you.

When getting started with an umbrella company, contractors will need to compare umbrella company fees, understand what services the company will offer, know how they deal with expenses and how they will get paid to find the right one for their contracting needs.

Like many other contractors, if you already have enough on your plate, Umbrella Search can help take care of this for you.

At Umbrella Search, we take the pressure away from the busy contractor. We do the research to help contractors make well-informed decisions that will help elevate their contracting careers. Our friendly team will work closely with the contractor to learn their needs and requirements to find an umbrella company perfect for them.

To find out more about how Umbrella Search can help you, get in touch for a quote, and we will get back to you as soon as possible. Ready to give it a go for yourself today?


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