If you’re mystified by all the legal and admin requirements for setting up and running a limited company, then an umbrella firm may be for you. The administrative burden of running a Limited Company can be significant, and without the correct knowledge you may end up paying out more than you need to in terms of tax. If you choose to use an umbrella company instead, you can increase your take home pay and remain outside of IR35 legislation. This is because you will be categorized as a full-time employee and entitled to all the normal statutory payments that come with being a permanent company employee.
Weekly and Monthly Payments
Depending on the umbrella company you choose, you can be paid either weekly or monthly, depending on your preference. Companies like www.net-work-1.co.uk use faster payment systems that allow money to be cleared and processed more swiftly.
Offsetting Your Business Expenses
You can legitimately offset your business expenses by using an umbrella company. HMRC states that if your place of work is temporary then the cost of travel to this site, your accommodation if you’re staying away from home, your subsistence and specific tools can be offset against tax. If you’re with an umbrella company, this part of your income will be treated as non-taxable, so that you don’t pay any tax at all on your legitimate expenses.
Short Term Commitments
Umbrella companies are a great option for those who don’t want to be tied down by long-term commitments. Most umbrella companies don’t require you to enter into minimum contracts and if you decide that contracting isn’t for you, you can change direction with ease. If you set up a Limited Company, then you will need to make insurance commitments to cover you while working on site and to indemnify the work that you do.
Increased Flexibility and Less Responsibility
With an umbrella company, you can also guarantee that your day to day administration tasks will be taken care of. You will no longer have to worry about invoicing your agency, you end of year tax forms or the offsetting of your business expenses. The umbrella company will forward your national insurance contributions and forward your pay net of PAYE. It’s much easier to sign up to be part of an umbrella company than it is to register as a Limited Company, and the benefits of choosing the former are numerous.