Before you make your decision, you should know exactly what each option entails in order to find the best one for you.
Firstly, we’ll take a look at the PAYE option.
PAYE stands for pay-as-you-earn. This is the most common way of paying tax in the UK, with most employees paying tax in this way. Self-employed workers are usually the exception to this as these workers instead pay tax through self-assessment only after they have received their income.
It’s important to note that contractors will be subject to the same tax bands whether they work through PAYE or umbrella in line with current tax bands.
Find out more about UK tax bands and what you will pay in this government guide.
Therefore, the main differences between PAYE and umbrella don’t lie in how much tax the contractor will pay.
So, how are the two options different?
One of the main differences between PAYE and umbrella is how the contractor will work through each.
Whereas with an umbrella company contractors are free to choose what contract work they take on and when they do it, with a PAYE agency, contractors do not have the freedom to choose.
This means that PAYE agency contractors will be told which work they must do, with which clients and when.
Although some contractors prefer this option as it gives them a level of security, most contractors prefer the freedom and flexibility to choose their own work. This allows contractors to develop their careers at a rate that’s right for them, and go after high-value contracts with their preferred clients.
Another key difference between the two options is who can claim expenses.
It is usually the case that umbrella company contractors are able to claim back business expenses. These expenses must be legitimate business expenses that have been accrued on the project.
This is great news for umbrella company contractors, however, as it means that these expenses can be offset against their tax bill.
This is in contrast to PAYE agency contractors, however, who are unable to claim back expenses and therefore don’t benefit from this.
Another difference between PAYE and umbrella is continuity of employment.
Umbrella company contractors are given continuity of employment. This means that they will receive one handy tax code, which can make things like getting a loan or mortgage a whole lot easier. This is because the umbrella company employs the contractor, so although they may work on a number of contracts throughout the year, they still benefit from just one tax code.
PAYE agency contractors, on the other hand, do not receive continuity of employment. This means they will receive several tax codes throughout the year. As we have mentioned, this can make things like getting a mortgage more complicated, which is considered a drawback by many.
Another benefit to contracting through an umbrella company over a PAYE agency is that umbrella contractors qualify for statutory benefits.
This means that umbrella contractors receive:
Just as it sounds, this is great news for umbrella contractors who can rest assured that they will still receive income should they fall ill or need to take a break.
PAYE agency contractors do not qualify for statutory benefits, however. In essence, if a PAYE contractor does not work, they do not get paid. This is seen as a significant drawback to this option for many.
The final difference between PAYE and umbrella that we will look at is insurance.
With an umbrella company, the contractor will be covered by the necessary insurance they need when contracting.
Every umbrella company is legally obliged to have employer’s liability insurance which protects the contractor if they fall ill or become injured on the contract.
Further to this, many umbrella companies also provide the contractor with professional indemnity insurance and public liability insurance.
This is great news for umbrella contractors as it means they do not have to worry about organising and paying for this insurance out of their own pockets.
PAYE agency contractors are not covered by such insurance, however, and will therefore need to organise setting this up themselves. Again, this is seen as a disadvantage to the PAYE option.
After reading our key differences between PAYE and umbrella, if you have decided that umbrella is the best route forward for you, you will now need to find a company to work with.
That’s where Umbrella Supermarket come into play.
Now you’ve decided that umbrella company is the best move for you, the next step is to find a company that’s the perfect match for you and your contracting needs.
To do this, simply head over to our umbrella calculator and we will do the rest.
Having input your details and preferences, we will show you a list of the most suitable umbrella companies for you, outlining the services you will receive, how much they charge in fees and we will even show you what your payslip will look like under each one.
Try it out for yourself today and take the first step to finding the best umbrella company out there.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
Every contractor faces the decision between PAYE or umbrella, but how do you know which is the best option for you?
After all, PAYE and umbrella both have key differences, meaning contractors should do their research to find the best path for them.
Thankfully, Umbrella Supermarket is here to help. In this guide, we take a look at PAYE vs. umbrella, explaining what you should know before making the all-important decision.
