Here are some tips to help you find the best umbrella scheme, and to ensure that you compare like with like before taking the plunge.
Before we start, the most important thing to remember is that all PAYE umbrella companies operate in the same way. They are all subject to the same tax and National Insurance rules, and they can only legally reimburse you for genuine expenses. The only way one can save you more money over another is by charging you less for their services.
How to compare umbrella companies
Umbrella companies charge either a fixed weekly/monthly fee, or a fixed percentage of the value of your invoices. Most contractors choose schemes with charge a fixed payment, otherwise the fees from a percentage scheme can be ridiculous.
Find out how much the umbrella charges per week or month (it is cheaper to have a monthly agreement as less work is involved for the scheme to generate your payments).
2. Net or Gross Fees?
To accurately compare umbrella fees, you need to know what the gross charges are (i.e. before tax). Some umbrella companies quote net fees (i.e. how much you will actually pay, as you can claim tax relief on these fees), which can be confusing.
3. Entry or Exit Fees?
Find out if you will be charged any initial ‘set up’ fees, or any charges when you want to leave the scheme, or transfer to a different scheme.
4. Online Access
Most contractors will expect to have access to an online portal, so they can upload their timesheets and expense claims 24/7. You will often be able to view your payment and expense history online.
5. Dedicated Manager
Find out if you will be assigned a dedicated account manager when you join a new umbrella company. This is always the preferred option, otherwise you will be dealing with different people each time you need to get in touch.
Although the tax relief available on pension contributions has been eroded in recent years, pensions still do offer one of the few tax breaks available to contractors. Many umbrella companies operate contributory pension schemes. Ask for more details before signing up.
7. Insurance Cover?
What type of business insurance cover will you receive as an employee of the umbrella company? Many clients now insist that their contractors are covered by professional indemnity insurance, for example.
8. Company Profile
How long has the umbrella company been operating?, how many clients does it have? A Google search may reveal some interesting feedback from existing clients, or ask other contractors what their experiences have been.
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- ClearSky Accounting - specialist support for contractors
- Visit Hiscox for Professional Indemnity and Business Liability Insurance
- Contractor Finance - up to £30,000, when you need it
- InTouch Contractor Accountants - Personal Online Accounting
- Join PCG - Free impartial start-up advice for contractors.
- Visit Qdos Consulting for tax investigation cover and IR35 insurance.
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