If you are considering using an umbrella company, you will need to know how to find the best one for you.

After all, not every umbrella company is created equal. In a competitive market, it can be difficult to cut through the noise and know which umbrella company you should choose.

That’s where Umbrella Broker can lend a helping hand. In this guide, we explain 4 steps every contractor should take to find the best umbrella company out there.

Step 1: Ensure an umbrella company is the right option for you

Although this sounds obvious, the first step should always be to ensure that an umbrella company is the best option for you.

After all, there are several different ways a contractor can operate.

The first option is through a PAYE agency. Here, the contractor will have no choice over which contracts they work on and with which clients. Instead, the agency will secure their work on their behalf.

The contractor will be paid by the PAYE agency who will collect the fee from the client. Their pay will be subject to PAYE tax deductions, which is the most common form of taxation in the UK.

The contractor will not receive continuity of employment, however, and therefore will not be given one handy tax code.

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The other option is to work through a limited company. Here, the contractor will be self-employed. This means they will be responsible for dealing with finding and securing contract work themselves. As well as dealing with all aspects of client relationships, invoicing the client and collecting the fee from the client.

These contractors will pay tax through self-assessment. Here, they are paid their fee first and must then pay the correct levels of tax and National Insurance. This means limited company contractors must ensure they set aside enough of their income to cover the tax bill at the end of the year.

These contractors must also deal with running a business and all the tasks this encompasses. Such as additional paperwork and admin.

Find out more about umbrella company vs limited company in our handy guide.

The third and final option is the umbrella company route.

Here, contractors experience the best of the PAYE and limited company options.

Umbrella company contractors are employed by their chosen provider. However, they are free to choose which clients they choose to work with and which contracts they work on, giving them more freedom and control over their contracting careers.

The umbrella company will deal with invoicing the client, collecting the contractor’s fee and paying them a salary. The contractor’s pay is processed through the PAYE system. Meaning that the contractor is always up to date with how much tax and National Insurance they owe.

Unlike PAYE agency contractors, umbrella company contractors are eligible for statutory payments. This means they will receive statutory payments in case they fall ill, need a holiday, or need time off for maternity and paternity leave.

Umbrella company contractors do receive continuity of employment and one handy tax code. This makes life significantly easier when it comes to applying for a mortgage or loan.

For these reasons, thousands of contractors UK-wide choose the umbrella company route.

If this sounds like the best option for you, next, we will look at the steps to finding the best umbrella company out there.

Step 2: Do they offer the services you require?

Every contractor is different and has a different set of requirements. Therefore, when finding the best one for you, contractors should start by looking at the level of services the company will provide.

As a minimum, every umbrella company should offer the following to the contractor:

  • The umbrella company will employ the contractor. By becoming the contractor’s employer, the umbrella company will process the contractor’s salary through their payroll. Meaning the right levels of tax and National Insurance are deducted and paid through the PAYE tax system. This means that the contractor’s tax and NI obligations are always up to date.
  • The umbrella company will take on the task of invoicing the client on the contractor’s behalf and will chase up any late payments.
  • They will take care of necessary paperwork and admin tasks
  • They will ensure that the contractor is covered with the correct levels of insurance
  • The umbrella company will provide the contractor with statutory rights. Including paid sick leave, holiday leave, maternity and paternity leave and a workplace pension

However, for contractors that require additional services. Such as help with things like childcare tax credits. It is important that they check that the umbrella company can provide this.

Step 3. Carry out a background check

Contractors should ensure that they are choosing an umbrella company they can trust.

Therefore, contractors should carry out their research. Look at reviews of the company to ensure they are finding the best fit. Contractors can also check out whether the umbrella company is registered with the Freelancer and Contractor Services Association. This proves that the company’s operations, policies, and processes meet strict standards.

Step 4: Use an Umbrella Company to find the best provider for you

A great way for contractors to find the best umbrella company is to use an umbrella company calculator.

Our umbrella company is quick and simple to use. Simply enter your key details and preferences and we will present you with a list of the best-suited providers for your contracting needs. We will also show you what your payslip will look like under each umbrella company and exactly what services you will receive.

We only ever work with the best umbrella companies we know you can trust. So you can rest assured you’re making the best choice. Ready to give it a go for yourself today?

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