Do I need to complete a self-assessment as an umbrella contractor?

HM Revenue Customs (HMRC) uses a ‘self-assessment’ system to collect income tax which is not accounted for via the Pay As You Earn (PAYE) method. This is so HMRC can calculate what you owe based on your overall income, even if you have multiple sources of income. This is necessary as the tax you owe from one payment, may impact the amount of tax you owe from a separate earning because of the UK’s current tax bandings system.

With the January 31st deadline fast approaching, let’s take a look at whether self-assessment is something you need to consider as a contractor or not…

Do umbrella contractors need to complete one? 

It depends! Most of the time, when working with an umbrella company, you become employed by them, so you are not responsible for declaring any tax for income earned through this employment. However, there are some circumstances in which this may change.

What if I have additional income? 

Undertaking any kind of work that offers additional sources of income is classed as being self-employed. In which case you will need to file for self-assessment

Can you provide some examples? 

• Your claim for expenses is £2,500 or more
• Have income from savings/investments of £10,000
• You are a sole trader
• Receive regular annual income from a trust, settlement or the estate of a deceased person

I still have more questions, where can I find more information? 

Visit www.gov.uk/topic/personal-tax/self-assessment, for everything you need to know about completing a self-assessment.

Want to know more about Umbrella companies? 

Our experienced team are well versed on the topic and would love to chat! Get in touch today via [email protected] or check out our FAQs blog!