With upcoming changes to off-payroll legislation looming, more and more contractors and freelancers are likely to require an umbrella company’s services. However, with hundreds of providers in the UK, what should you look for from an umbrella company in 2021? Keep reading, and we’ll explain the most important factors to consider.
Umbrella companies have offered a popular PAYE payroll service for many years. However, with so many to choose from, where do you start your search for the best umbrella company? Transparency is key.
Umbrella companies will process your payroll in accordance with HMRC’s tax system ‘Pay as you Earn’ (PAYE). And, every compliant umbrella will do the same. Therefore, every compliant umbrella company should be quoting you a very similar take home pay projection.
Unfortunately, it’s come to our attention that some umbrellas are manipulating the figures they give to contractors and freelancers. This misleading and unethical approach is enticing hard-working and honest professionals to sign up with a provider that has effectively lied to them. Please don’t be fooled! It’s vital you understand exactly how an umbrella company has produced their take home pay calculation for you, and don’t be afraid to ask questions if you have any concerns.
Reliable umbrella companies are easy to join and easy to leave, thus providing their employees with flexibility. The very best umbrella companies will be able to offer you payroll on a week-by-week basis. This approach is popular with contractors who operate through a limited company, but require the services of an umbrella when they’re working on assignments that fall inside IR35. Hopping on and off an umbrella company’s payroll is completely normal and if you think this is likely to be you, make sure the umbrella you join is understanding and can cater to your requirements.
Have a look online and see if the umbrella company you’re interested in using has a good reputation. Google and Trustpilot reviews will help you make an early assessment. But, see if there is any discussion about them on an online forum such as the Contractor UK platform.
Compliance with HMRC rules and regulations is important. If you use a tax avoidance scheme, even by mistake, you could face severe penalties from HMRC – even well into the future. Therefore, we recommend you only consider using an umbrella company that can prove its commitment to compliance. FCSA accreditation is a great place to start. If a payroll provider is accredited by the FCSA, they have been able to prove they operate in compliance with UK tax law.
Umbrella company margin
The only income an umbrella company generates for itself is the margin. Therefore, it’s in your interest to find an umbrella company with a low margin. However, don’t solely base your decision on the margin because the other factors listed above must come into consideration.
If you’re interested in an umbrella company example, visit our page here. It includes a hypothetical scenario that explains how the supply chain interacts, and how the contractor is paid through the umbrella company.
Top 10 umbrella companies
To help our readers, we’ve collated a list of top 10 umbrella companies, and they’re all FCSA accredited. We recommend you check them out because there are some fantastic special offers on at the moment for newcomers!