When should I use an umbrella company?

As a contractor, using an umbrella company is a straightforward way to operate and offers a compliant way to get paid for your assignments. However, if you are new to contracting, you may ask: “When should I use an umbrella company?”. Continue reading to discover why and when you might consider using an umbrella company.

When should I use an umbrella company?

There are many reasons why you should use an umbrella company for your payroll. We’ve compiled a short list of why you should use an umbrella company and to help you better understand when you should use an umbrella company.

Short-term contracts

If you work on short-term contracts, umbrella companies are a great way to get paid, as you can be registered in under 10 minutes and use the umbrella company for as long or as little as you need. Umbrella companies offer an affordable way to contract as they usually charge between £15 – £30 per week, and the margin is only charged for weeks you work.

New to contracting

If you are new to contracting, umbrella companies can be a great way for first-time contractors to test whether they enjoy it.

Continuity of employment

When you register with an umbrella company, you can benefit from continuous employment, which can be helpful for applying for a mortgage or loan. Continuity of employment means you can work for different end clients and still have one employer – the umbrella company.

Income is paid via PAYE

When paid by a compliant umbrella company, all income is paid via PAYE – HMRC’s system for collecting Income Tax and National Insurance. If your only income is below the self-assessment threshold (£150,000 before tax) and paid via PAYE, it is not likely you’ll need to submit a tax return.

Inside IR35

If you accept assignments inside IR35, umbrella companies offer a reliable way to get paid and ensure you comply with IR35 legislation. You’ll be paid like a permanent employee (via PAYE), and all income will be taxed and paid to HMRC on your behalf before you receive a net payment for your assignment.

You do not want the administrative burden of a limited company

As a director of a limited company, there are certain responsibilities you must fulfil, including:

• File your accounts and Company Tax Return
• Keep company records and report changes
• Follow the company’s rules, outlined in the articles of association
• Pay and report Corporation Tax

If you do not want the administrative burden associated with becoming the director of a limited company, you should use an umbrella company for your payroll.

Your agency or end client does not offer PAYE

Some recruitment agencies do not offer PAYE and require contractors to use an umbrella company for their payroll. Umbrella companies can also provide support and advice regarding contracts, insurance, tax and other administrative tasks.

Benefits

When you register with an umbrella company, they become your employer. Therefore, as an employee, you are eligible for statutory employment benefits, such as maternity, paternity, and sick pay. You will also be enrolled in a workplace pension scheme, but you can opt-out if you do not want to use it. Some umbrella companies offer additional benefits such as a rewards service (Churchill Knight Rewards) or a salary sacrifice service.

Churchill Knight Umbrella

As an FCSA-accredited and SafeRec-certified umbrella company, you can rest assured that you are in the safest hands and will receive a compliant and reliable payroll service. From registration and throughout your time with us, we have dedicated teams to provide ongoing support and helpful information to ensure you receive an exceptional service.

When you register with Churchill Knight Umbrella, you can benefit from the following:

• Easy registration (can be completed in under 10 minutes) online or over the phone
• Ongoing support from our Onboarding Team and Customer Service Team
• Access to My Digital, our umbrella payroll app and portal
• £25 million insurance cover
• Same Day Faster Payments
• There are no joining or leaving fees and no hidden costs
• Employee benefits
• Salary sacrifice
• Churchill Knight Rewards
• Rewards for referring your friends and colleagues to our service

If you are interested in finding out more about using an umbrella company, please call our team on 01707 871622. You can also request a tailored take-home pay calculation or schedule a call for a time that suits you, and a member of the team will be in touch to answer any questions you may have.