Many contractors, in order to claim for expenses on their tax returns, have to make a decision as to whether to become a limited company or to become part of an umbrella company. Of course, if they choose the latter, they will want to become part of the Best UK Umbrella Company and so in order to find that, they will probably have to go online and look at some reviews but having found it, the results could both save a lot of finances and a lot of stress doing administrative tasks. Although some contractors think that becoming a limited company would be the best decision financially for them, others think that the relatively few financial gains that a limited company may offer over being part of an umbrella company are not worth the extra administrative hassles that come with it. It is likely that very few contractors enjoy paperwork, even if they were quite adept at it, which most aren’t and so any reduction in administrative tasks is seen as a huge advantage, a benefit not to be missed.
Due to the tax regulations in the UK, it is difficult for someone that is self- employed to claim for expenses but if they are part of an umbrella company, which lists the contractor as being in their employ, claiming for expenses is far easier which results in a contractor having a far lower tax bill to pay. Of course the contractor will have to pay a fee to become part of an umbrella company but whatever the fee, it will not be as high as the savings that can be made on tax payments. As an employee of the umbrella company, it is them and not the contractor that looks after payments to the contractor’s workers and so the contractor merely has to provide weekly timesheets for their workers, to the umbrella company who then pay them.
Of course, also as an employee, it will be the umbrella company that creates any invoices on behalf of the contractor and in turn collects from those invoice payments. The contractor will therefore have to provide the umbrella company with their bank details so that, after having taken out their agreed fee, the umbrella company can deposit those incomes to the contractor’s account. Having professional administrators to look after their accounts, most contractors feel a lot more comfortable and confident about going out and seeking more contracts which of course results in still higher incomes for the contractors. These financial benefits are not just available by contractors registered in the UK but can also apply to many of the offshore registered contractors.
Being a contractor can have some great financial advantages but those advantages will only be appreciated if they are paying as little as possible in taxes and by becoming a limited company or joining an umbrella company can ensure that they pay no more than is absolutely necessary and yet keep within the UK’s taxation rules and regulations.