Each day we hear from contractors who originally joined umbrella companies, and now as established contractors, are looking for proper advice on whether remaining an umbrella employee is the best choice longer term.
Umbrella? - Choosing the Right Trading Route
There are other trading options available to contractors besides umbrella employee - own limited company, sole trader, partnership and limited liability partnership. For short term lower rate contracts, being an umbrella employee can be the right choice, but for long term high earners this is probably not the case.
The facts are:
- If much of your contract work is found via recruitment agencies agencies or direct with larger client companies then they may stipulate that you need to trade via a UK limited company of some sort - i.e.setting up your own small consultancy business or working as an umbrella employee.
- HMRC are happy for freelancers to run their own businesses so long as they properly consider whether tax rules such as IR35 and Income Shifting apply
- Self-employed contractors usually get more credibility, income, status, experience
Umbrella Company Contractors Miss Out?
Our guides section includes useful background, but the best way to understand fully is usually to call us on 0800 121 6016 for a chat about your circumstances and future plans. We’ll offer uncomplicated advice on whether being an umbrella employee is right for you, or if you're better suited to one of the other trading options. You might be losing out on things like:-
Tax planning, salary and dividends - more earnings if you're genuinely not caught by IR35. More flexibility about when you draw business earnings, substantial NI and tax savings through proper pension planning.
VAT registration - cut costs by claiming back VAT on purchases or using the Flat Rate Scheme
Full expenses - As well as travel, allowable expenses would include computer equipment, mobile phone, internet costs, etc.
Flashing your 'Managing Director' business cards in nightclubs, at school reunions and at your work-shy brother-in-law.
Whatever trading route you choose, we work hard to make running your own business straightforward and hassle-free. Put your details in our contact form or press some buttons and talk to one of our accountants on 0800 121 6016.