On Wednesday the 30th of October, Chancellor Rachel Reeves delivered her first Budget, pledging to ‘invest, invest, invest’ to grow and restore economic stability.
Here are some of the Budget highlights that will impact you as an umbrella company contractor.
National Insurance contributions
While small and medium sized businesses will be concerned after hearing of the Employers’ National Insurance (NI) changes, this is something that will also affect umbrella company contractors.
Because an umbrella company technically employs workers, Employers’ NI falls on the umbrella to pay for, however, this arrangement differs compared to a permanent employer situation.
With an umbrella setup, the company isn’t benefitting from any of the work carried out, and so this cost is passed on to the umbrella company contractor with the Employers’ NI coming from the contractor’s income before their salary is calculated.
To learn more about this take a look at our Why do I have to Pay Employers’ National Insurance? page.
From the 6th of April 2025, the Employers’ NI rate will increase from 13.8% to 15%.
The IPSE has described this as a ‘hammer blow’ to the umbrella sector.
Take a look at our news story page to read more about this.
National Living Wage and National Minimum Wage
National Living Wage (NLW) and National Minimum Wage (NMW) rates are set to increase from the 1st of April 2025.
- For those aged 21 and over – increasing from £11.44 to £12.21
- For those aged 18 to 20 – increasing from £8.60 to £10.00
- For those aged under 18 – increasing from £6.40 to £7.55
- For apprentices – increasing from £6.40 to £7.55
Need help deciding between Limited or Umbrella? We are happy to help- give Sophie a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com
Tackling non-compliance in the umbrella company market
The Chancellor also spoke about tackling the significant levels of tax avoidance and fraud in the umbrella company sector.
From April 2026, recruitment agencies will be responsible for accounting for PAYE on payments made to the workers supplied via umbrella companies.
If there’s no agency involved then this responsibility will fall on the end client’s business instead.
The government says that these measures are needed in order to protect workers from large unexpected tax bills that are caused by dishonest non-compliant umbrella companies.
This announcement may have caused some confusion around the safety of contracting through umbrella companies.
First of all, while there’s no denying the fact that non-compliant umbrella companies exist, the vast majority of them will be compliant.
Umbrella company red flags to look out for are:
- if there’s a third party in the chain making the payment
- if the umbrella company claims that you’ll be able to keep more of your earnings compared to other companies
- if you’re asked to sign an annuity, loan or other agreement which involves a non-taxable element of pay.
For more advice and guidance on this, take a look at our Is it safe to contract through an umbrella company? page.
Our Budget page provides a more detailed breakdown of the Autumn Budget 2024.
We hope you found this page helpful. If you’d like to sign up or need any further information, please call one of our friendly experts on 01442 795 100 or email sophie.lewis@dolanaccountancy.com.
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