HMRC guidance for umbrella contractors updated

HMRC has recently made changes to its ‘Working through an umbrella company’ official guidance. 

The advice page, which has been hailed “the best official guidance yet”, exists to help contractors better understand the ins and outs of working through an umbrella company. 

In this article, we offer a snapshot overview of the key updates, so you don’t have to. We know how busy you contractors are after all!

What’s new? 

Changes were made to the following sections:

1.How you get paid

This part of the document simplifies the payment process for contractors who may not have worked through an umbrella before. To summarise: 

• Timesheet is sent to the recruitment agency, who pays the umbrella company an agreed rate (assignment rate x hours worked).
• Umbrella company will pay the contractor their salary, with relevant payments already deducted (see below). 

2.Checking your payslip

HMRC reminds readers that their chosen umbrella company will make the necessary deductions on their behalf, including:

• Income Tax
• employee National Insurance contributions
• employee workplace pension contribution
• student loan repayments (if applicable)
• other deductions that you have agreed to or are legally required to pay

While this list is informative, it has been criticised for its lack of explanation on what constitutes ‘other deductions’. Remember, you can always ask your umbrella for a breakdown of the deductions made if they list it as anything vague or if there is a cost you are uncertain about. 

Overall, Mint is happy to see that HMRC is taking steps to make information around how umbrellas work more accessible. We hope the document continues to be updated so contractors can stay in the know and make well informed decisions when choosing an umbrella provider. 

If you’re looking for an accredited umbrella, you’ve come to the right place! Drop us an email via [email protected] to get started.