Earned Income Tax Credit | Advice On Using A Tax Umbrella Company

Advice On Using A Tax Umbrella Company

If you are thinking of casting off from the shores of being permanently employed and heading into the potentially stormy, but nonetheless lucrative, waters of contracting or freelancing, then you need to consider how you will set up your new business so as to minimize your long term tax liabilities, while maximizing your income and making it simple for your clients to deal with you. So, what are your options? You basically have two – set-up a limited company or utilize the services of a tax umbrella company. Setting up a limited company is the most tax efficient way to operate, and you can claim back all kinds of expenses (equipment, software, etc.). If you are only concerned with paying the least amount of taxes possible, then it is probably the best option for you. As you would expect though, there are lots of legalities and paperwork involved with setting up a limited company. There is the cost to factor in too; it is not a cheap thing to do. As well as paying to register the company, you will also have to pay for a solicitor and an accountant. If you would prefer to avoid the hassles involved, and to focus on simply making money, then a tax umbrella company is what you need. The way a tax umbrella company works is that, basically, you become their employee for payment and tax purposes. Now, the term employee is used in the loosest possible sense here, as they have no control over you whatsoever. In reality, they are actually working for you, as they will take care of all of your invoices, payments and tax contributions. You can be up and running with a tax umbrella company in just a few days. You just need to submit your personal and banking details to them and they will take care of all of the paperwork and legal technicalities for you. They will pay you fortnightly or monthly (depending on what you agree with them) directly into your bank account. The amount that you receive will be the total amount that your clients paid to the umbrella company, minus your tax contributions and the umbrella company’s fee.

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