Umbrella Company Glossary
Brought to you by umbrellacompanies.org.uk
There is a misconception that umbrella companies are highly complicated. While there is plenty of information to get your head around, they’re far more straightforward than you might have imagined.
To help you understand umbrella companies better, we’ve created an umbrella company glossary that provides simplified definitions for many of the key terms and topics surrounding umbrella companies. Our site is full of resources to assist contractors and freelancers, and many of the definitions below link to further information that we hope you find helpful.
There is currently 1 Umbrella Company Term in this directory beginning with the letter N.
N
National Insurance
National insurance is a tax paid on your earnings – whether self-employed (outside IR35) or working for an employer in a full-time position. There are several brackets of national insurance payments. The below is taken directly from the government\'s website:
- Class 1: Employees earning more than £242 a week and under State Pension age - they’re automatically deducted by your employer.
- Class 1A or 1B: Employers pay these directly on their employee’s expenses or benefits.
- Class 2: Self-employed people earning profits of £6,725 or more a year. If you’re earning less than this, you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record.
- Class 3: Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record.
- Class 4: Self-employed people earning profits of £11,909 or more a year.
When you use an umbrella company, you are an employee and will be subjected to employee national insurance contributions. However, you will also need to consider the employment costs, including the Apprenticeship Levy and the employer’s national insurance contributions. Umbrella company employees will see these deductions on their payslips as well. To avoid a loss of funds, umbrella company contractors must consider the employment costs when negotiating the rate of pay with an agency or end hirer. Many agencies offer inflated pay rates to those who opt to use an umbrella –to cover the employment costs.
- Class 1: Employees earning more than £242 a week and under State Pension age - they’re automatically deducted by your employer.
- Class 1A or 1B: Employers pay these directly on their employee’s expenses or benefits.
- Class 2: Self-employed people earning profits of £6,725 or more a year. If you’re earning less than this, you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record.
- Class 3: Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record.
- Class 4: Self-employed people earning profits of £11,909 or more a year.
When you use an umbrella company, you are an employee and will be subjected to employee national insurance contributions. However, you will also need to consider the employment costs, including the Apprenticeship Levy and the employer’s national insurance contributions. Umbrella company employees will see these deductions on their payslips as well. To avoid a loss of funds, umbrella company contractors must consider the employment costs when negotiating the rate of pay with an agency or end hirer. Many agencies offer inflated pay rates to those who opt to use an umbrella –to cover the employment costs.
