New to contracting? It can be daunting when you aren’t sure what pay option is best for you. Let our specialist contractor accountants make things as simple as they can be. Have a look at the various options available.
This is where a recruitment agency takes you onto their books and pays you directly. The agency will deduct tax and national insurance, just like any employer would. Some agencies will also accrue holiday pay for you, so that you still get paid when you’re off. Others will pay your holidays up front, by adding it to your hourly rate.
When an agency pays you directly, they have to pay Employers National Insurance, being 13.8% extra in 2013/14. So, the cost of paying you, let’s say £15 per hour (including holiday pay) actually costs them £17.07. Choose to work for an umbrella company or through your own business and it’s likely the agency will pay the umbrella company or you up to the full £17.07, as they no longer have to cover the cost of paying Employers National Insurance. That could mean more money in your pocket, for every hour you work.
Simplyco Umbrella is a great alternative to being paid directly by a client or agency. Even better, it’s equally safe and compliant. You become a PAYE employee of Simplyco. And you receive all the usual benefits and statutory rights that go with it. You also get to claim any genuine expenses you run up while going about your business. Which of course, improves your take home pay.
The way it works is simple. We’ll agree a contract for services with the agency or client and agree an employment contract with you. You send us your timesheets and expenses. We calculate your wages, add your expenses, then pay you directly into your bank account.
We separately bill the agency or client for services as agreed.
And the best thing about Simplyco Umbrella? If you’re not sure whether contracting or freelancing is right for you, it’s a good way of testing the waters while you decide. You get some of the tax advantages that come with running your own business, without the responsibility of actually having one. It’s also a good option if you’re on a shorter term contract (typically 6 to 12 months). If you like the sound of an umbrella company, we’d recommend a minimum rate of £9.50 per hour to make it worthwhile.
If you tend to work on highly paid longer-term projects, you’re often better off setting up your own Limited Company. You may hear people refer to it as a Personal Services Company, or PSC. First, you’ll need to form and register your own company. And as it will be a legal entity in its own right, set up a bank account under your company name.
If you’re new to contracting or freelancing, no doubt this will look a little daunting. But don’t worry. We’re here to take all the hassle away. From helping you form your company, to handling all your accountancy and filing.
OPTIONS TO STEER CLEAR OF…A few friendly words of advice
We’ll go out of our way to help you choose the best way of working. Our services are here to help you work in the most profitable, tax efficient and compliant way possible. That means we’ll only ever offer solutions that are both legal and moral. So we recommend you stay away from any tax avoidance schemes.
Protect your earnings and stay on the right side of the law. Give a wide berth to:
- Offshore umbrella companies and schemes (offshore includes Channel Islands and Isle of Man)
- Pay-day by pay-day schemes
- Umbrella companies that claim to be “HMRC Approved”
- Composite companies
- CIS companies that do not verify your UTR number
If you’d like a bit more advice on what’s the right option for you, give our specialist contractor accountants a call on 01900 898440 or drop us a message. We’d be more than happy to help.