Umbrella contracting for newbies: 3 things you need to do

New to umbrella contracting? Here are a few tips to help you on your journey…

1.Do your research

Just like you would before applying for a role at a new company, you need to do some digging on the umbrella company you’re planning to work under. This is even more important in the world of contracting, as you can easily end up on the naughty step with HMRC should you not be paying the correct amount of tax. Unfortunately, tax avoidance is rather prominent amongst umbrella companies so make sure the umbrella you’re interested in is compliant with UK tax law. 

A green flag to look for is if the brolly is accredited by either FCSA or Professional Passport. This means it has been officially verified that the company operates compliantly with HMRC’s rules. Check out our blogs for further advice and guidance, including 5 tips to spot an umbrella tax avoidance scheme. 

2.Ask for a pay illustration 

Did you know that you can find out what your take-home pay will look like before you sign up to work with an umbrella company? Simply ask for what is known as a ‘pay illustration’ – this will give you a rough idea of what your pay will look like after the relevant deductions such as tax and National Insurance. However, and this is a BIG however, make sure you pay close attention to how much take-home pay the umbrella company is offering. Anything more than 80% should be met with caution as it likely points to tax evasion.

Check the pay illustration you are provided with contains: 

• Originate from PAYE – the tax system of HMRC
• Employ a precise tax code
• Rely on the accurate number of working days in a month
• Consider holidays and time away from the office
• Incorporate the margin of the umbrella company
• Exclude an allowance for expenses

Still need further clarification? Luckily for you, we’ve written a blog dedicated to explaining pay illustrations!

3.Prepare for registration 

While registration shouldn’t be a long process, it’s a good idea to have all the relevant documents at the ready (including Passport, National Insurance Number, bank details, P45 etc). This is also the perfect opportunity to ask questions about anything you are concerned about or need more information on. Remember – there are no silly questions! It’s best to know exactly what you’re signing up for instead of regretting it down the line. 

If you’re interested in working with us then make sure to get in touch with our friendly team on 0203 967 6846.