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Many people choose to work in the self-employed sector due to the numerous benefits, and with the umbrella company route it has additional advantages that you won’t find working as a sole trader or limited company contractor.

What is an umbrella company?

As an umbrella company contractor, you are essentially employed by an umbrella company.

An umbrella company is effectively the middle man between the contractor and their client; the umbrella employs a temporary worker on behalf of an employment agency and the agency will then provide the services of the worker to their clients.

It’s worth noting though that an umbrella company does not find contracts for the worker.

All tax liabilities are worked out for you and automatically deducted from your payslip, whereas for a sole trader or limited company contractor, the responsibility of completing a self-assessment tax return is entirely up to them to file and then pay any tax owed.

For more information on how you’ll get paid, you can read our Using an Umbrella Company – Who Pays Me? page.

What are the benefits of using an umbrella company?

As an umbrella company contractor, you will have many of the benefits that come with self-employment, as well as some of the security that comes with permanent employment.

These include:

A better work-life balance is something that the majority of us strive for and this is most definitely a highlight for those who choose to become self-employed.

As a contractor you will often find that you are paid a higher daily/weekly/monthly rate compared to salaried employees, yet you will also have the freedom to pick and choose when you work.

Not having to worry about completing a self-assessment tax return
A sole trader and limited company contractor will need to file all of their financial information and pay for owed tax on an annual basis before the 31st January of each year.

As an umbrella company contractor, this is all sorted for you by your umbrella company – they will provide you with a payslip, deducting any income tax or National Insurance Contributions (NICs).

Still entitled to standard employee benefits
As mentioned previously, being employed by your umbrella company means that you’ll benefit from some of the security that permanent employees have. So, unlike sole traders and limited company contractors, you are entitled to statutory maternity/paternity and sick pay, as well as annual leave, which will be calculated based on the hours you work.

Not having to worry about the IR35 legislation
An IR35 status impacts the amount of tax and NICs you pay, as well as whether you are able to claim back on certain expenses.

You either fall ‘inside’ or ‘outside’ of the legislation with the determining factors based on your level of risk, liability and responsibility as a worker.

As an umbrella company contractor this is something you don’t need to worry about, as you are treated the same as a permanent employee with regards to NICs and tax.

For more information, visit our page IR35 and Umbrella Company Contractors.

What about expenses?

In general, an umbrella company contractor cannot claim back on expenses, just as an employee can’t.

However, there may be some situations where it might be considered, for example, say you were asked by a client to travel away from a usual place of work – a company might offer workers mileage/travel costs, as well as a contribution towards their meals while they’re away.

Sole traders and limited company contractors are able to claim back on work expenses, however, it’s important to remember that they are not entitled to other benefits, such as maternity/paternity, sick or holiday pay, whereas an umbrella contractor is.

If you’d like to read more on this, you can take a look at our Umbrella Company Expenses: A Guide page.

We hope you found this page helpful. If you have any questions about umbrella employment, our team of experts are available to answer any queries, so give us a call on 01206 591 000 or email

Why Choose Contractor Umbrella?

Contractor Umbrella is the hassle-free, straight talking umbrella company that provides umbrella employment for UK based contractors and freelancers. Independently voted as the best umbrella company by the readers of Contractor UK.

As one of the most trusted umbrella companies in the UK, we guarantee our employees peace of mind, absolute compliance and complete security. We are one of the longest standing and most respected umbrella companies in the UK.

If you’d like to find out more, call us on 01206 591 000 or request a call back by completing our online form.

Benefits of working through Contractor Umbrella;

  • Fast and easy registration –  be ready to work in 24 hours, simply register online and we’ll take care of the rest.
  • Calculate your take home pay – use our online calculator to find out how much you could be taking home through Contractor Umbrella.
  • Same day payments – We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.
  • Our Service Guarantee – is our guarantee that you will be looked after at every step of the way.
  • Flexible Limited Company accountancy – when you sign up to our sister company Dolan Accountancy, you can transfer to Contractor Umbrella when umbrella employment better suits or your assignment sits inside IR35.
  • Employee Benefits at Contractor Umbrella there are many benefits available to you as our employee including Childcare Vouchers, our Employee Rewards Scheme, Group Pension Scheme, Foreign Currency Exchange, Contractor Accommodation, Contractor Mortgages and much more.
  • Expert Contractor Support Team – Every employee of Contractor Umbrella has access to our expert Contractor Support Team who are available to deal with any queries that you may have. You can get in touch with the Contractor Support Team, through the online chat, by email or by telephone.
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