Due to upcoming legislation changes, more and more contractors are considering using an umbrella company for their payroll. However, is it worth your time requesting multiple umbrella company calculations? Keep reading and find out more.
Background to umbrella companies
Umbrella companies are an excellent payroll choice for contractors who find themselves inside IR35. This is because there are no tax benefits to contracting through a limited company when inside IR35, and umbrella companies are generally considered the easiest way for contractors to get paid. By joining an umbrella company, you’ll become an employee of theirs, and they’ll process your payroll in accordance with HMRC’s tax system – PAYE (Pay As You Earn).
If you’re new to umbrella companies, it’s only natural to want to explore your take home pay potential from a series of umbrella companies – so that you pick the one that projects you with the highest pay retention. However – this may be a big waste of your time – and we’ll explain why.
Compliant umbrella companies will process your pay in exactly the same way
The only thing that should impact your pay retention through an umbrella company is the umbrella company margin. For example, if you approached 100 compliant umbrella companies – all with a £25 per week margin – your take home pay through each one should be exactly the same each payment frequency – to the penny. They operate PAYE – and PAYE is black and white.
Therefore, if you’re keen to save a few pounds each week or month, it’s worth remembering that the lower the margin – the higher your pay retention. However, in reality, the difference won’t be much, and you mustn’t sacrifice the level of service you receive for a tiny inflation in pay retention.
What do we recommend?
Don’t waste your time requesting multiple umbrella company calculations from dozens of providers. We recommend you identify 3 umbrella companies that are all FCSA accredited. Why? Because FCSA accredited umbrella companies have proven they’re compliant with UK tax law, they operate ethically, and they have their employees’ best interests at heart. Then, approach each one and ask them for a take home pay projection. Make sure they base it entirely on your circumstances, including:
- Tax code
- Earnings
- Payment frequency
- Time you plan to take out of the office (annual leave)
- Umbrella company expenses (it’s extremely unlikely you’ll be entitled to umbrella company expenses, so make sure they’re not included in the calculation)
- Holiday Pay (whether you’ll have it accrued or paid each week/month)
- Pension contributions (if applicable)
- Student loan (if applicable)
If you’re interested in using an umbrella company, please have a look at our top 10 umbrella companies. The FCSA accredits each one, and some have special offers at the moment.
Request an umbrella company calculation
By completing the short form on our umbrella company calculation page, we’ll send your details to a top 10 umbrella company on your behalf. They’ll then get in contact with you to discuss your umbrella company calculation. There is absolutely no obligation to use their service. Alternatively, you can request a call back from a top 10 umbrella company here.
