Contracting has always been a popular career choice for many; but in recent years with changes to the economy more and more people recognise the benefits of flexible working. One of the most confusing decisions when new to contracting is how to be paid for your services. Running your own business, either as a sole trader or through a limited company is often a popular choice one you have made the decision to become a ‘career contractor’ and you are happy to commit long-term to the way of life this career choice entails. However, when starting out most contractors choose to turn to one of the many ‘umbrella companies’ the UK has to offer.
I don’t need to keep expenses receipts with an umbrella companies
The easiest thing to remember here is that any claim you make for an expense must have proof that you have incurred it. The umbrella company may not ask you for them all of the time, but a compliant organisation will, in line with their commitments to HMRC will conduct spot checks and will always ask you to verify that you have retained the proof of purchase. HMRC is placing greater emphasis on tackling tax avoidance and could therefore conduct an audit at any time and with a compliant umbrella company like Green Lantern, safety first is an important point.
I can keep 90% of my pay with an umbrella company
Compliant umbrella companies employ their contractors and operate Pay As You Earn (PAYE) income tax and National insurance contributions. In addition, providers must adhere to the National Minimum Wage and process holiday pay on top. All of these elements are a legal requirement – there is no room for manoeuvre. On top of this, the umbrella company has staffing costs, rent and other operating costs to bear and will therefore retain a small portion of the contract rate for its costs. With this in mind, such a high percentage of earnings is impossible to achieve within the confines of UK law.
As mentioned above, HMRC are keen to tackle tax avoidance with new legislation introduced on a regular basis. With this in mind, its sensible to discount umbrella companies that claim to offer a guaranteed percentage return or anything that seems to good to be true. Anything other than compliance could mean that your tax affairs are under the spotlight.
I won’t get the same benefits as “normal” employees
As employees of an umbrella company, contractors are automatically provided with the same rights and benefits as permanent workers. This means that compliant providers like us here at Green Latern will provide freelancers with holiday, sickness and maternity & paternity pay as standard, and all other statutory employment rights..
If you’re thinking about making the leap and pursuing a contracting career we have lots of options and can always help. Our dedicated team is always on hand to answer any query you may have and we will always offer you a safety first approach whilst providing you with an excellent service. Just give us a call on 0207 164 2116.