An umbrella company, also known as a PAYE company, is a business used by contractors, freelancers and the self-employed as an alternative to setting up a limited company. It can act as an employer for those who work temporary jobs.
There are advantages and disadvantages to using an umbrella business:
When you work under an umbrella company, you’re basically assigning a middle man to work between you and your clients. You sign a contract before you start working with them and, for all intensive purposes, they act as your employer. They then sign contracts with your recruitment agencies or clients on your behalf.
Your time and work is recorded via timesheets that are shared with your employer and client. You’ll be paid according to your timesheets.
The umbrella business will pay you via payroll, as if you were an employee. From your pay, they deduct Income Tax, National Insurance, pension contributions, student loan repayments, and their own fees. They will also reimburse you for any tax reliefs that you’re eligible for.
If you’re a construction worker working under the CIS scheme but you also worked through umbrella companies on other jobs, you would need your P60 for each company when completing your Self Assessment.
In short, it depends on your circumstances so you may have to complete a tax return whilst working for an umbrella company. To avoid potential penalties, your best bet is to check with HMRC directly!
Of course we can! Get in touch with our helpful experts today for comprehensive advice and support with completing your self-assessment tax return.