If you are a contractor or freelancer, or planning to become one, an important consideration that must be taken into account is the tax liabilities that will be incurred as a result of your status. It is imperative for an independent contractor to have an effective system in place. If not, you could receive a large tax bill out of the blue – possibly even a fine. It is a balancing act however, because an effective tax system could hinder the ability your client’s ability to pay you. So, the system adopted needs to take both of these aspects into consideration.
For all these reasons it can be incredibly beneficial for you to contact an umbrella company. An umbrella company can handle your payment and tax system for you. There is, of course, always the option to set up a limited company. However, there are many issues and high expenses associated with preparing one of these companies, not to mention the amount of time it takes to set one up. Through an umbrella company you can focus on your company and not your taxes.
The way an umbrella company works basically involves you becoming an ’employee’ of them. This is only on paper, however. The company is still yours to run and treat as you see fit. An umbrella company only takes you under its umbrella, so to speak, in order to handle all of your tax and payment issues. An employee from the umbrella company will be assigned to assist you through all your intermediary needs as well as guide you along when you need to make important decisions. You can work closely with this representative or let them handle things on their own.
The only step you need to take is to send a some personal information as well as the method you use to bank. Once they receive your banking information they will handle the rest of the paperwork. When you are paid, the company will direct deposit the amount into your bank account. This amount includes what your clients have paid less the amount that the umbrella company takes as its charge. The payments will come either monthly or fortnightly. The way you receive the payment is completely up to you. It just takes a couple of days for everything to get set up.
When going to hire an umbrella company, it is important that you do your research on each one of them. You need to know what you are getting into before becoming involved. You need to know just how much they will take out of your check in fees and how often they are willing to pay you. There are a lot of them that will say that they have “exclusive tax breaks” and even “special dispensations.” The tax office will not make any special rules for any company. This is simply false. Finally, you need to see just how much experience they have and just how good their reputation is. The choice is yours.