| Self-employed freelancers, contractors and temporary | | | | operating within Inland Revenue guidelines should |
| workers enjoy the freedom that comes with being | | | | provide all the tax benefits of having your own limited |
| self-employed, however, setting yourself up as a sole | | | | company, including a special dispensation for expenses |
| trader, partnership or as a limited company can have | | | | and tools for dealing with potentially complicated issues |
| implications for your earning potential. Some | | | | such as IR35 (where intermediaries such as service |
| freelancers are looking for an alternative to paying high | | | | companies could be set up to provide the services of |
| levels of tax and increasing their take-home pay | | | | a worker to a client company enabling the client to |
| through using the many services of umbrella | | | | make payments to the company, without deducting |
| companies. | | | | PAYE or NICs) and Section 660 (the so-called |
| Also known as service companies, umbrella | | | | “husband and wife tax”). Also, every umbrella |
| companies provide self-employed workers with a | | | | company has to have Employer's Liability and Public |
| managed limited company through which freelancers | | | | Liability insurance cover, which helps to cover the |
| can operate multiple contracts while the umbrella | | | | freelancer in the event of any legal cases being |
| company does all the administration. This saves the | | | | brought against them in relation to the services that |
| freelancer time on all the activities normally associated | | | | they provide to their clients. |
| with running a limited company, including processing | | | | By joining an umbrella company as a client, a |
| timesheets and expenses, raising invoices, calculating | | | | self-employed worker in effect becomes an employee |
| tax and National Insurance contributions, collecting | | | | of the umbrella company, while retaining the |
| payments from third parties, executing legal contracts, | | | | autonomous flexibility to find and choose their own |
| dealing with filing, regulations etc. Some umbrella | | | | work, clients, rates, terms and conditions. While limited |
| companies (managed companies) offer additional | | | | company status may suit some freelancers, other |
| benefits such as holiday and sick pay, some | | | | self-employed individuals may benefit from joining an |
| (composite companies) offer these benefits and also | | | | umbrella company. Each person has their own set of |
| allow the freelancer to become a shareholder of the | | | | circumstances and judgements need to be made |
| umbrella company making it possible to reduce Tax | | | | based on those. Umbrella companies help freelancers |
| and NI liability by dividend payments or revenue-share | | | | to save time on administration, time which could be |
| schemes. Other types of umbrella companies | | | | better spent finding new business or working on |
| (combined companies) provide all the features that | | | | existing accounts. Umbrellas companies are a simpler |
| managed companies and composite companies do, | | | | way for some self-employed workers to get paid and |
| but in addition they will tailor the service to the needs | | | | to pay less tax, in addition to other benefits, and these |
| of the freelancer. Umbrella companies can also provide | | | | companies aim to reduce the tax burden to the lowest |
| the freelancer with access to other benefits not | | | | possible level. Seeking advice from a financial |
| usually available to them, such as pension schemes, | | | | professional such as an accountant will help you to |
| private healthcare, life and critical illness insurance and | | | | decide if this is the best option for you and if it will help |
| childcare vouchers. | | | | to save you money on your tax bill. |
| A reputable and well-structured umbrella company | | | | |