If you use an umbrella company, do you need to submit a personal tax return?

An interesting question – and one that is regularly asked online by umbrella company employees. The short answer is that it depends entirely on your personal circumstances. If your only source of income is paid to you via an umbrella company (PAYE) – you don’t need to submit a personal tax return. This is because the umbrella will send your tax and National Insurance Contributions (NICs) to HMRC on your behalf. However, there are loads of extra revenue streams that regular people have. As a result, you might need to submit a personal tax return. Let’s have a look at this in a bit more detail.

What is a personal tax return?

A personal tax return, or self-assessment tax return, is a system that HMRC uses to gather tax. Commonly, tax is deducted automatically on wages, pensions and savings. However, if you have any additional income, HMRC will require you to declare this through a self-assessment, and then pay the appropriate tax by submitting your tax return.

Submitting tax returns can be stressful and time-consuming. Therefore, if you need to do one, we highly recommend using a professional accountant to help you out! Check out our directory of FCSA accredited contractor accountants – they’ll be able to help!

Contracting through an umbrella company

If you are a contractor who uses an umbrella company, the umbrella will ensure you pay the correct tax and NICs to HMRC (PAYE). Therefore, if your only income is paid to you through an umbrella company – you don’t need to submit a personal tax return. The same applies to permanent employees whose only source of income is PAYE.

However, it’s common for regular folk to have additional sources of income – even if in reality, it isn’t a life-changing amount of money. It’ll come as no surprise that if you’re earning – the government wants to know about it, because they want you to pay more tax! Speaking of the government, their website is full of useful information if you need to find out more about self-assessment tax returns.

Do you need to submit a personal tax return?

As we’ve mentioned above, if you’re an umbrella company employee and your only income is paid to you via the umbrella company, then no – you don’t need to submit a personal tax return. However, there is no shortage in additional income streams that mean you do need to submit a personal tax return.

If any of the following apply to you, you will probably need to submit a self-assessment tax return:

  • You carry out any work as self-employed, or as a sole trader;
  • You’re a high earner;
  • You think you’ve overpaid tax (you might be entitled to a tax rebate in this case);
  • You run a limited company and take money as dividends;
  • You receive money for renting property;
  • You receive foreign money (income);
  • You access untaxed money, such as capital gains or losses;
  • You have your own personal pension organised, or have private savings accounts/investments;
  • You earn additional income for conducting work;
  • You wish to claim tax relief from business expenses occurred during the last tax year;
  • You or your partner are earning over £50,000 and are receiving child benefit.

Conclusion

If you are contracting through an umbrella, but are earning additional income, it may be worth contacting an accountant and finding out if you need to submit a personal tax return. It’s definitely not the end of the world, and engaging with a personal tax specialist will certainly take away any stress from the situation!

Oh, and before you go, if you are using an umbrella company, have you considered switching to one of our top 10 umbrella companies? We believe compliance is critical, so every umbrella company we feature in our top 10 is accredited by the FCSA. And, some of them have some fantastic offers on at the moment for new clients! Go and check them out – you may be able to save yourself some money which you can put towards a professional accountant completing your tax return!

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