Setting out in the world of self-employment is never easy. Although you’ll undoubtedly enjoy the freedom of being your own boss, ditching the financial security of the 9 to 5 can often seem downright unthinkable. Instead of earning a steady, reliable wage, you’ll be required to source your own clients and maintain full control of your finances.

For many contractors, setting up as a limited company simply involves too much financial responsibility, especially if they’re new to contracting or just working on a short-term assignment. Fortunately, umbrella companies provide contractors with a much more straight-forward solution, allowing them to enjoy the flexibilities of self-employment without any of the additional hassle or stress.

But why exactly should you consider working through an umbrella company, and how do you know if this is the right solution for you?

How to Get Started

Getting set up with an umbrella company has always been remarkably simple, which is why this is such a popular option for those who are new to self-employment. When signing up with Brookson, for example, all you have to do is book your consultation, sign a contract with us and we’ll have you all set up later that same day.

Instead of worrying about registering a business name at Companies House, you can start working through an umbrella company straight away. There’s no confusing paperwork. No hidden fees. You just sign up and then focus on getting the job done.

Getting Paid

Once you’re completely signed up, you become an employee of the umbrella company. In addition to providing statutory employee benefits (such as sick pay, holiday leave and workplace pensions), this means you’ll also be paid through PAYE just like a permanent, full-time employee.

In order to get paid, umbrella employees need to submit a completed timesheet, which we’ll then use to charge the client exactly what you’re owed. The client makes the payment directly to us, and we then calculate and deduct your tax and National Insurance contributions before passing the payment onto you. All umbrella companies also retain a pre-agreed margin for their services.

Ultimately, this means you no longer have to worry about keeping up with tax legislation or inadvertently breaching any rules. Brookson takes care of all the frustrating paperwork, all the confusing admin, and helps you focus on doing what you do best.

Claiming Expenses

Although you’ll be treated as a regular employee, you can still claim expenses and tax relief when working through an umbrella company. However, HMRC has strict guidelines in place when it comes to claiming allowable expenses, and you’ll need to make sure you’re within these guidelines before making a claim.

Making a viable claim will be largely dependent on your own specific circumstances, but umbrella companies will only reimburse business-related expenses incurred during an assignment. To be more specific, you can typically claim expenses on unavoidable costs needed for you to actually do your job, such as important equipment or travel fares.

Is an Umbrella Company Right For You?

Despite the obvious benefits of operating through an umbrella company, this isn’t always the best solution for everyone. There’s no denying this is the easiest, most convenient path into self-employment, and it completely eradicates much of the stress involved with working for yourself. However, depending on your circumstances, setting up as a limited company may prove much more financially beneficial.

Due to the enhanced tax efficiencies, long-term self-employed workers will ultimately take home more pay as a limited company; however, workers who aren’t ready to fully detach themselves from conventional full-time employment (or for the pressure of running their own company) will undoubtedly lean more towards the security of umbrella companies.

Whether you set up as a limited or umbrella company, Brookson is always here to help you on your path towards self-employment. Get in touch with us today to claim your FREE consultation and learn more about the best working options for you!