What is the difference between paye and ltd umbrella pay

An Umbrella company is an employer; one that employs contractors, freelancers and supply workers. When you join, you become their employee. You are given and are protected by a permanent contract of employment which, unlike a contract directly with an agency, remains in place even when you're in between agency assignments.

So, not only does the Umbrella company pay you for assignment work, they also give you a range of employment-related benefits. These benefits aren't relevant for everyone, and this guide will help you figure out whether or not it's right for you.

Alternatively arrange a chat and we can discuss what is best for you. If you fall into one or more of these groups, an Umbrella is most likely to be your preferred route:. I currently operate my own limited company, but due to the April IR35 reform, I've been asked to find an alternative way of being paid.

When contractors can no longer use their own limited company, they often choose umbrella employment instead. It allows you to retain similar levels of freedom and flexibility but also offers you greater security and a range of employment benefits.

Your Umbrella should be able to pay you for all of your assignments at once, be it from one agency or ten. You get the benefit of one payment, one pay day, one tax code and one P60 and one pension provider. It simplifies your tax affairs and makes it easier to prove your income for example, on a mortgage or visa application. Your Umbrella can pay you benefits, such as maternity and paternity pay if you've got a little one on the way, and sick pay when you're under the weather.

A good Umbrella provider will be an expert on matters related to temporary workers. It's likely they'll offer to support you throughout your career, by advising on tax, pay, contracting and employment issues. For example, they should be able to answer your questions on tax codes and help you understand your rights under the Agency Workers Regulations.

Our Lead Accountant, Vicky, explains what benefits you can enjoy by choosing to work through an umbrella company in under a minute. The simplest way to describe an umbrella company is that you become an employee of the umbrella company. This means that the agency will pay the umbrella company, who then after deducting all of the necessary PAYE and NI contributions pay the contractor their salary.

Take a look below to see the key features of an umbrella company:. The agency must deduct employed levels of tax and NI contributions are calculated and paid before the contractor receives their salary. Take a look below for some of the key features of PAYE:. In the UK, an umbrella company directly employs contractors and freelancers who work inside the IR35 regulations.

Generally, an umbrella company's services are administrative and accountancy-based - such as managing timesheets, calculating PAYE tax and NI contributions, invoicing the client, collecting monies and paying the contractor. If you were to follow the agency payroll route, you essentially become an agency worker and they are responsible for making all of the necessary deductions and paying you your salary.

The first difference is that when an umbrella company is carrying out the necessary deductions, they will also calculate any tax relief on any allowable business expenses where the contractor isn't subject to supervision, direction or control. This could mean an increase in take home pay. So, where eligible, contractors working through an umbrella company simply need to submit their timesheets and log their expenses online.

The next big difference is the additional benefits you get when working through an umbrella company. With both an umbrella company and agency payroll you will have access to certain statutory benefits including sick pay.

However, an umbrella company will employ you under a contract of employment so whether you carry out one assignment or you'll be employed under the same contract, giving you a record of continuous employment which helps with mortgage or loan applications. It also helps to ensure that you're on the correct tax code whilst providing you with just one pension pot.

You will also have the added benefit of an inclusive insurance package, something you won't get if you were to be paid via agency payroll.

The way an umbrella company works is pretty simple. If you would like to discuss how our Umbrella service can help you, please do not hesitate to contact a member of our team on or email us at info contractorumbrella. We have over 20 years experience, have won numerous awards and have helped tens of thousands of contractors. Contractors only have two options: 1. Why use an umbrella company? With remote working rapidly becoming more common than traditional office work, and following a year in Recent reports have shown it could not be a better time to consider working within the industry.

One report has Read More. Award winning service! Sign Up. Umbrella vs. Limited — which is the best option for me? What is a Limited company? What is an Umbrella company? As a contractor, there are a number of ways in which you can operate, but two key choices are: through your own limited company or under a PAYE umbrella. Both options offer a number of pros and cons depending on your experience, the length of time you intend on contracting and the level of time you have to dedicate to paperwork.

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