Your umbrella company questions answered
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What is an umbrella company?
An Umbrella Company is a special type of service provider designed to provide PAYE payroll to contractors. The Umbrella will invoice an agency for the contractors time & expenses, and pay the contractor the funds less tax & fees.
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Why use umbrella companies?
Umbrella Companies are great for first time contractors who have never contracted before. This is because they are quick & easy to work with, with set up taking less than a day. This means it’s the fastest way for contractors to get paid less tax.
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What is umbrella vs PAYE?
There is no difference. A a result, all umbrella companies pay their contractors through the “pay as you earn” scheme. This means they pay your income tax & national insurance to HMRC and provide you with a payslip.
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Am I an employee of the umbrella company?
Yes. In order to process your payments through PAYE, the umbrella company will become your employer. This won’t affect how you perform your contract, but it will mean you don’t need to complete a self-assessment or tax return.
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What is an accredited umbrella company?
There are two main umbrella accreditations, FCSA & Professional Passport. Both of these have different requirements and standards. Some agencies will only work with an Umbrella Company if it holds one of these accreditations because they are perceived to operately “compliantly”.
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What do I get in return for my umbrella fee?
An umbrella company will not only process your payments through PAYE. In addition, they will provide you with insurance cover for the work you perform, holiday pay and other statutory payments like sick pay. Some higher end umbrella companies will also offer perks like store discounts.
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Why should I compare umbrella companies?
Not all umbrella companies offer the same benefits like faster payments. Some are accredited by external auditors. All this will contribute to the fee they charge for providing their payroll services.
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How do I find the best umbrella company?
F-ndr has developed an umbrella company comparrison tool that’s designed ot help contractors compare, side by side, the UK’s most trusted umbrellas in order to help them find the best umbrella in the UK.
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What is an umbrella company in the UK?
As a result of the contractor actually being an employee, the umbrella company can pay the contractor through the UK Pay As You Earn scheme. This means that after invoicing the agency for the time the contractor has worked and receipting the funds they receive, the umbrella company will process those funds through PAYE.
On behalf of the contractor, umbrella companies will pay HMRC any income tax and national insurance contributions due on the contractors work, in turn sending the net funds (i.e. less tax & fees) to the contractor. All UK taxes and deductions (including the umbrella fee) will be detailed on a payslip.
The umbrella company make money by charging a fee for this payroll service. In return for the umbrella company fee, the umbrella will also provide the contractor with insurance that covers their work (professional indemnity & liability insurance) and statutory benefits like sick pay. Some umbrella companies will also provide enhanced benefits like discount vouchers.