Beginners tips for a first time Umbrella company contractor

Congratulations on your decision to start a career in contracting! What an exciting and freeing career you’re about to embark on. Whilst there’s plenty of elements to look forward to, there’s lots of decisions to be made before you start your first contract.

One of those decisions is whether you’ll form your own Limited Company and contract through it, or join an Umbrella company and contract under it. In this blog we will specifically be looking at contracting under an Umbrella company.

Getting started

Setting yourself up with an Umbrella company is an extremely quick and easy process, which is probably why many view it as such an attractive choice for first time contractors, or those who are returning to the industry and need a quick solution. As you’re not forming your own Limited Company you won’t need to choose your company’s name, register it with Companies House, decide on a share structure, or who your employees will be. There’s also no complicated paperwork, hidden fees or important decisions to be made. By using an Umbrella company none of this is needed, and the setup is far simpler and quicker.

How will you get paid?

After you’re signed up, you’ll effectively become an employee of the Umbrella company. The good news with becoming an employee is that you’re now entitled to the same employment rights as you would if you were employed by a regular employer. These include statutory maternity and paternity pay, sick and annual leave pay, workplace pensions, etc. You’ll also be paid through PAYE just as you would if you were a permanent employee.

To get paid you’ll need to complete a timesheet which will be signed by your end-hirer / client on either a weekly or monthly basis, which you’ll then pass onto your Umbrella company who will then use it to charge the client for the work completed. Once payment has been received the Umbrella then calculates the amount of tax and National Insurance Contributions (NIC) due, deducts that value from your salary, along with their service fee, and then pay you what’s left directly into your chosen bank account.

So there’s no worrying as to whether you’ve paid the correct amount of tax or if the taxman will come after you, as your Umbrella will have taken care of this all on your behalf. You also won’t need to keep up to date with any tax legislation or think about how you’d be affected, as you’ve already paid what’s due at source.

What about claiming expenses?

Whilst you’re technically classed as an employee, you’re still able to claim some expenses and tax relief when you choose to work under an Umbrella company. The ability to claim expenses is strictly monitored by HMRC, and so you’ll have to check with your Umbrella to make sure you’re eligible for those expenses before claiming them.

What if you decide you want to go Limited?

Not a problem! With SG Umbrella you get the best of both worlds. Contract under our Umbrella for a contract which is determined as ‘inside’ IR35 or if you’re just starting out and testing the waters. You can then switch over to our Limited Company services with SG Accounting when one of your future contract’s is deemed ‘outside’ IR35 or if you’re ready to form your own company. You will of course have to set up your own Limited Company, but our team of director-level accountants are specialists in serving the complex and demanding needs of Limited Company contractors, and will hold your hand throughout the entire process to ensure it runs as smoothly and as quickly as possible.

How to get started

Simply get in touch with our team of expert accountants here at SG Umbrella to discuss your contracting plans and how SG can help you achieve your goals. No question is too big or small, and we’ll take you through each process in a simple and easy-to-understand way, ensuring you’re crystal clear on how we work as an Umbrella and why our solution is perfect for when you’re just starting out.