Umbrella Companies For Contractors

An umbrella company will send invoices on your behalf and will then make payment to you after they have received payment from your client or agency. The point of one is to act as your employer, for tax purposes, for the duration of a contract with a client or an employment agency. Sending out invoices and calculating tax can take a huge amount of time. An umbrella company will deal with all that stress for you so you can concentrate on more important things.
Once a payment has been received by the umbrella company, they may either make a payment to your bank account immediately or they may send you fortnightly payments including a pay-slip with information on the total amount received and any deductions made. Be wary if an umbrella company offers a service that can reduce your income tax or national insurance contributions as this is in fact illegal. You are required to notify the company of any expenses you accrue whether they are chargeable or not and the company will take care of them for you either by refunding you or by detailing them as tax benefits.
Therefore, your taxable income will be reduced by the value of the expenses. That is not to say that expenses can be used to reduce your tax bill. Anything that you claim must be allowable by the Inland Revenue and must be a cost to you personally that is entirely attributable to the work you have done. A company should only charge you a fixed fee as if you earned $50 a day or $500, their amount of work would be the same. Do not rely on information or advice given to you by the agency you work for. These agencies are sometimes given financial incentives to recommend the services of a particular umbrella company. A simple few hours searching online will enable you to find the company that will suit your needs best.

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