Why Do Contractors Work Under Umbrella Companies?

 Why Do Contractors Work Under Umbrella Companies?

If you’re getting into the world of contracting, you might be wondering the best way to set up your business and invoice clients. It’s easy to follow the self-employed or limited company route for speed and convenience, but another option to consider is working as an umbrella employee. Below, we’ve put together some of the reasons why and benefits of doing so…

Less administration

One of the biggest reason why so many people turn to professional companies rather than setting up their own is to reduce their administrative burden. The best umbrella companies will take care of your national insurance and taxes each month, so you’ll receive a standard paycheck at the end of each month and won’t have to worry about nasty taxes or surprises.

IR35 compliance

The UK government is planning some major changes to contracting work this April, and so by working with an umbrella company, you won’t have to worry about IR35 or have to comply with the changing rules and legislation. This not only gives you peace of mind but ensures that your clients will stay loyal to you, as there’s no threat of additional costs on their side.

Employee benefits

One of the biggest downsides of working as a contractor is that you’re only paid when you work. By working through an umbrella company, you’ll be viewed as an employee and will, therefore, be able to benefit from things such as sick pay and holiday. According to one report, three-quarters of freelancers don’t offer themselves sick pay or holiday pay, so by moving to an umbrella company, you can live a normal life and reduce your stress levels.

Claim expenses

When you work as an employee for an umbrella company, you’ll be able to claim back some expenses for your tools, equipment and travel, so you can hold onto more of your money. In fact, many umbrella companies offer portals where you can log your expenses easily, so you don’t have to worry about doing endless hours of accounting to claim for a couple of stamps.


Finally, you might want to consider working through an umbrella company if you’re not sure whether contracting is the right option for you. If you’re working on short-term contracts or don’t have a permanent job, you’ll benefit from increased freedom and flexibility. What’s more, as you grow, you can choose to switch to a limited company to hold onto more of your monthly income through dividends, reducing your tax and national insurance contributions.

There you have it – just some of the reasons why people choose to work with umbrella companies as contractors. By selecting the right organisation to help you manage your money, you’ll be able to save time, pay less tax, and have more peace of mind and financial security. Whatever you decide to do, we wish you the very best of luck with your career plan!

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