Umbrella Company Contractor Options
It is looking a bit grim for umbrella companies since April 2016 so we look here at alternative umbrella company contractor options.
Umbrella Company contractors now pay more tax.
The ex-Chancellor, Geroge Osborne, confirmed that contractors who failed the Intermediaries test, IR35 to you and me, cannot now offset travel and subsistence expenses against tax.
This is a huge blow, therefore, to both the contractors and umbrella companies themselves.
Contractors Leaving Umbrella Companies
Of course, many contractors in umbrella companies will just stay with them. Many of them don’t claim expenses against tax anyway.
However, it will be harder to recruit new contractors to go into PAYE umbrella companies in the future.
Also, at least some of those 200,000 plus contractors who are in umbrella companies will look at alternatives.
There’s already an average differential in tax and National Insurance paid by umbrella contractors of around £10,000 over personal service company contractors.
This tax change, therefore, makes that differential even greater.
Looking at IR35 Status
It will incentivise some brolly contractors to look at their IR35 status again. They will want to see if they can change their contracts, and working practices, to be outside IR35.
So, what alternatives are there for the contractors?
Well, they could simply incorporate and use a limited company or personal service company as the Government refers to limited companies for sole contractors.
However, they would have to make sure that their working practices and contracts change to make them outside IR35.
This would save them £10,000 to £15,000 a year, on average.
Here are a few other options that they can look at now.
Tax Efficient Limited Companies
They might even want to go further and use a tax efficient limited company vehicle.
Contractors seldom plan efficiently when it comes to their tax. They can save even more tax if they did so, if they take the advice of experts at tax planning.
Moreover, using Tax Efficient limited companies they can get returns of 85% or greater on their income depending on their circumstances and how much money they can save.
For more information, or to apply, click on Tax Efficient Limited Company Option.
Offshore Umbrella Companies
Using offshore umbrella companies, contractors can retain 85% to 90% of their income.
So, for more information click on Offshore Umbrella Companies for Contractors.
Those are the Umbrella Company Contractor Options now for UK contractors.
