Umbrella Companies Services

We hope this page will tell you everything you will ever need to know about using Umbrella Companies

Click on the links below to read our more detailed guides:

Guide to Umbrella Companies 

What is an umbrella company?

Quite simply, an umbrella company is a separate company that acts as an employer for contractors working on fixed term contracts. They also serve as an intermediary between the contractor and their end client or agency. The principle function of an umbrella company is to organise payment for the contractor. To do this they collect the contractor’s earnings from the end client or agency and then pay it onto the contractor with tax, national insurance and their umbrella company fee deducted.  

There are many urban myths surrounding umbrella companies and the way that they work and you should be wary of firms advertising 'special' dispensations or expense policies 'approved by' the Inland Revenue, that claim to allow expenses without the need to produce receipts. The Inland Revenue has made it clear that it intends to challenge any company considered to be actively encouraging tax avoidance through fraudulent expense claims.

SJD Accountancy provides Umbrella Company Services to contractors and freelancers through our recommended provider Parasol.

Limited Company or Umbrella Company - is it right for me?

Click here to read our quick guide. If you earn less than £25k or are on a short contract and don't intend to stay contracting for long, then maybe an umbrella service would be best for you. Ultimately, the decision it is up to you; working through an umbrella company is simpler than working through your own limited company but you will take home less money from your contract.

How does it work using an Umbrella Company?

Read the steps below or click here for a flow chart of what takes place between an umbrella company, recruitment agency and end client:

  • The umbrella company will sign a contract with your recruitment agency.
  • You will sign an employment contract with the umbrella company.
  • You submit both timesheet and expenses information.
  • The umbrella company will invoice your agent/client for the work you have done.
  • The umbrella will receive funds for you from the agency.
  • You receive your money less tax, NI contributions and the Umbrella services fee and your umbrella company will send you a payslip just as with permanent employment.

Umbrella Company - Take home pay calculator

The key question on all Contractor's minds is 'how much will I earn / take home'? You'll typically take home anywhere between 60% - 65% of your contract value. However, for a more accurate calculation try Parasol's take home pay calculator. Simply input your weekly/monthly income and predicted expenses and it will instantly estimate your take home pay for you.

Contractor Expenses using an Umbrella Company

By claiming all appropriate allowances and expenses you can minimise your tax bill; however, this is not a way of avoiding tax. Obviously receipts should be kept for all the expenses that you claim. Remember it is you the Revenue will investigate and not your umbrella company, be very cautious of companies who say you do not need to keep receipts and can claim for things you have never actually bought. If you can't prove it the Revenue will view it as tax avoidance.

For a full and comprehensive list of what you can claim click here.

Moving from Permanent to Contracting

Although permanent work has the security of a regular income and employment benefits, contracting is where the real money lies. Read all about the real life experiences of contractors who have made the move from permanent work into contracting: Life as a Contractor Case Studies

If you choose to use Parasol Group, but then wish to convert to a Limited Company at any time Parasol will arrange this for you quickly and easily visit www.parasolgroup.co.uk or call 0800 4701549 to find out more.

Quick Guide to Limited Companies

It is very important to stress that these must be genuine, one person limited companies and not a 'scheme' dreamed up by what are nothing more than marketing organisations.

The first things you, the contractor will need to do is form a limited company (this should only take five minutes on our website - this includes an application for free business banking, VAT and PAYE registration details - your accountant can help you with this). The director controls invoicing, the company bank account and decides on how much to pay themselves, which is made up of a combination of salary and dividends.

The limited company's contract can either be with the end client or the agency and the company can claim as tax free expenses: travel and subsistence, hardware and software, training, professional subscriptions, business telephone, accountancy fees plus any other business costs.

We've summarised the pros and cons of each method here, for a more detailed review click here for our full first-timer guide and here for our step-by-step guide to contracting.

You may also like to read our Guide to Contractor Expenses and take home pay case studies of a contractor who is using an umbrella company and another who's working through their own limited company.

SJD Accountancy provides Umbrella Company Services to contractors and freelancers through it's sister company Parasol.

 

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant* face to face.
  • Money back service guarantee. All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee of £120 plus VAT per month.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com.

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.