Self-employment can be complicated by taxes and National Insurance payments.
A self-employed contractor will find he is liable for paying income tax on his profits, VAT, business rates and Capital Gains Tax. He is liable for the payments of class1 National Insurance contributions for any staff, while his personal NI contributions only give him limited coverage. Book keeping has to accurate and all business receipts have to be kept for 5 years.
It’s not surprising that many self-employed contractors turn to umbrella companies as a solution to the continual paperwork and the problems of self-employed taxation. The price they have to pay for the service of one of these companies is well compensated for by the advantages. Working under an umbrella company removes the problem of all the self-employment taxes. The umbrella company accepts liability as the employer paying all the taxes and NI contributions. The contractor is free to continue working as his own boss and he has gained the advantage of better tax returns and health benefits.
The conditions and type of deal that can be arranged depends on the company chosen. Good deals can be made with most umbrella companies as they are looking for clients that are willing to work. A contract that is beneficial to both parties is of interest to everyone.
11 Feb 2013