Contractors have been using umbrella companies for a number of years now, and it’s often seen as an easier way to handle your finances and hold onto more of your money. If you’re new to contracting or are thinking about making the switch to an umbrella firm this year, fear not: below, we’ve rounded up some of the biggest reasons why you should make the leap.
Fast set-up time
Perhaps the most obvious reason why you should consider switching to an umbrella company is that it’s a relaxed and hassle-free way of becoming a contractor. Whereas setting up your own business can take weeks and require hundreds of pounds in admin and accounting fees, umbrella companies can have you up and running in just a few hours time.
Another benefit to working with an umbrella contracting company is that they’ll take care of your accounting, payroll, invoicing, administrative duties, and they’ll even chase payments for you. That’s ideal if you want to switch off after a busy week at work – leave the paperwork and daily responsibilities to a professional who can do it faster and save you lots of time.
Contractors who are dipping their toe in the water often turn to umbrellas because they can work on short-term contracts or even receive an hourly contract rate for their work. They don’t need to worry about spending weeks getting their paperwork up to scratch – they can see whether or not contracting is right for them via an umbrella company, and leave the role if it doesn’t work out. We think it’s the ideal entry-level option for freelancers and contractors because there’s no pressure to stick around or sign a long-term contract with a company.
No need for an accountant
The average accountant will set you back between £250 and £2,000 per year for a sole trader or contractor. Not only are accountants expensive, but they can demand your time through endless paperwork and administration. Umbrella companies assume the role of your employer, and so you effectively become a pay-as-you-earn employee, with all of your tax and national insurance deducted before you’re paid. It’s more convenient, means every penny you receive is yours to keep and removes the need for an expensive accountant.
Finally, umbrella companies are affordable. As we’ve just mentioned, accountants can be expensive, and bookkeepers charge additional fees on top. Some umbrella firms charge as little as £10 per paysheet, which is affordable whether you’re paid weekly or monthly by your client. Over time, you’ll save thousands of pounds in unnecessary fees, holding onto more of your hard-earned cash and investing it in whatever works for you, whether family or property.
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