Frequently Asked Questions
Answers to any questions you may have about umbrella employment, limited companies, or contracting in general.
Will I still need to complete an annual self-assesment for tax purposes if I join an umbrella company?
You may still need to complete an annual self-assessment tax return, especially if you have any additional income that has not been processed via PAYE; for example, interest on savings.
Am I eligible for statutory sick pay if I use an umbrella company?
Yes, as an employee of an umbrella company, you will be eligible and this will be explained to you at the outset.
Will I need to obtain business insurance if I join an umbrella company?
Your umbrella company will provide Professional, Employer and Public Liability Insurance cover for you. This does vary by umbrella company and you should make comparisons before entering into any new arrangements.
Will using an umbrella company enable me to claim more expenses?
As a rule, you will only be allowed to claim the same type of expenses allowable to all UK employees.
What can I claim as expenses?
As an employee of an umbrella company, you are entitled to claim certain expenses incurred during your work. These are clearly defined and will be shared with you by your umbrella company provider.
How do I claim tax relief for legitimate business expenses?
You can claim tax relief by filling up a P87 Form.
I have questions about by payslip. Who can help me?
Questions about your personal payslip can be easily answered by your umbrella company.
What is a Key Information Document (KID)?
A Key Information Document is a clear and transparent statement of your working assignments. The document’s purpose is to demonstrate to workers how a proposed rate of pay is affected by fees and deductions made through the supply chain.
What should I do if I have not been paid on time?
In the rare event that your pay has not been credited, you should speak to your umbrella company for a full explanation and support to rectify the situation.
Can I opt out of a Workplace Pension Scheme?
Yes, there are opt-out facilites in all workplace pension schemes and these will be explained to you by the pension provider after you have join the scheme.
What is a Workplace Pension Scheme?
The UK Government stipulates that all UK employees should be auto enrolled into a pension scheme. Contributions are made by the employer as well as the employee to build up reserve funds for your future retirement. Your umbrella company will automatically enroll you into their workplace scheme upon joining.
Am I entitled to paid holidays?
Yes, all UK employees are entitled to a minimum of 5.6 weeks of paid leave annually.
What should I expect to see included in my Contact of Employment?
Your Contract of Employment should include your salary or rate of pay, your pay period, your working hours, your place of work, your paid holiday entitlement, and the minimum notice period applicable to both parties.
Is a sponsored visa available directly from an umbrella company?
Despite the umbrella company offering you an 'employed status', only the organisation you are working for is empowered to offer work under a sponsored work visa. This would need to be in place before the umbrella company can act on your behalf.
What are Employers Costs?
Employers costs include items like Employers National Insurance and apply to all UK businesses that have a pay roll.
What do the letters and numbers in my tax code mean?
The letters and numbers reflect your personal tax allowance linked to your personal circumstances. Each Notice of Coding carries a full explanation on the reverse.
I have received an Emergency Tax Code. What is that?
HMRC uses Emergency Tax Codes when they do not have sufficient information to generate a formal tax code.
How does HMRC tell me what my tax code is?
HMRC will issue a Notice of Coding to each tax payer, usually during February of each year, and it will cover the new tax year starting on 6th April.
I think my tax code is wrong. What do I do?
If you think your tax code is incorrect, you should contact HMRC directly.
What is PAYE ?
PAYE stands for Pay As You Earn. It is the standard payroll system used by UK employers to collect employees' tax, National Insurance contributions, and other payments such as student loans.
Will I have to pay a different amount for tax if I use an umbrella company?
As an employee of an umbrella company, you will be taxed in line with the same tax bands as all other employees in the UK. The tax bands are based on total annual income and reviewed annually by the Chancellor.
What are the charges for using an umbrella company?
This will vary depending on the umbrella company but SmartWork, as a policy, keeps this charge to a minimum.
How will my final take home pay be calculated?
Since you will be employed by the umbrella company, your final pay is calculated according to normal PAYE processes applicable to all UK employees and is paid through normal methods. Tax is calculated after deductions for the small standard monthly fee from your gross daily or weekly charge out rate.
How will I benefit from joining an umbrella company?
An umbrella company will give you the reassurance that you will always be compliant with HMRC rules and demands especially when IR35 applies. Although a limited company might provide some tax advantages, an umbrella company ensures that you will get the maximum possible pay in the shortest possible time.
Will IR35 apply if I work through an umbrella company?
No, IR35 legislation only applies to workers using their own limited companies.
How do I join an umbrella company?
Joining an umbrella company like SmartWork is simple. We guarantee minimum paperwork and form filling. SmartWork will take care of the bulk of the process, while providing full onboarding support.
Is it compulsory that I use an umbrella company?
No. Contractors can choose to set up and run a limited company. However, if the work assignments fall inside IR35, then the services and support provided by an umbrella company is generally the best option.
How does an umbrella company work?
Contractors have the freedom to work on multiple assignments inside IR35 but with all of their pay and deductions being processed on their behalf by one organisation acting as their employer.
Do I need an umbrella company?
An umbrella company saves you from having to set up and run a limited company. Contractors needing to work inside IR35 legislation become fully compliant and all HMRC regulations are covered on your behalf.
What is an umbrella company?
An umbrella company provides payroll, PAYE, pension services and support to independent, self-employed workers without the complexities of setting up individual limited companies.