The umbrella company contracts out the services of the consultants to recruitment agencies and/or end clients. The umbrella company takes a margin from the income generated by these services and then pays the consultant under PAYE payroll whilst offsetting business expenses against their tax.
Some Umbrella Companies also give its consultants other benefits associated with employment such as:
The Umbrella Company Solution is often seen as the ‘hassle-free’ alternative to operating under a Limited Company or any Sole Trader structure.
Contractors regularly use the Umbrella Company Structure to avoid the administration duties and responsibilities normally associated with contracting, e.g. issuing invoices, chasing payments from customers, calculating tax and national insurance contributions, dealing with legislation such as IR35. Net retentions are normally higher than Agency PAYE but lower than the Limited Company Structure. The ease of set up and the fast and relatively straightforward payment processes make it a popular choice in the freelance and contractor market.
If you are interested in joining an umbrella company please call us on +44 (0) 20 8735 6370 or visit our sister website www.lesters-uk.com