IR35 legislation means that driving contractors and intermediary workers will no longer be able to self-assess their employment status, meaning that the unclear rules surrounding IR35 may cause unnecessary tax and national insurance contribution (NIC) payments.
What is an umbrella driver?
Some companies are taking on drivers off the payroll to avoid paying tax and National Insurance, and some drivers are happy to do so, because they think it reduces their tax bill. In this model, the Umbrella is the employer of the driver and responsible for PAYE and NI on their payments.
How does an umbrella company work for contractors?
In brief, umbrella company employs contractors and manages their payments, so that contractors can work for end-clients on short contracts or assignments hassle-free. The umbrella company pays the contractor after deducting necessary taxes and contributions like PAYE and National Insurance contributions (NIC).
Do you need an umbrella company to work for HMRC?
Always ensure that the umbrella company you appoint is 100% HMRC compliant. It’s easier said than done, purely because, there’s no industry standard for umbrella companies. Don’t sign up just because your umbrella company if offering you a more take home pay. There may be some hidden negatives.
Is it safe to work with an umbrella company?
Most umbrella companies are safe, but not all. Some indulge themselves in shady practices and try to lure contractors by promising higher take home pay. By using shady offshore schemes, they evade taxes, and in the end, contractors are penalised.
What kind of insurance can I get with umbrella company?
You will also find sector-specific providers will offer additional insurances relating to the role, for example, Drivers Negligence if you are an HGV driver. These insurances will ensure you are covered whilst working on assignments.
