Using an Umbrella Company: Umbrella Calculators and the IR35
There are a huge number of up sides to using an umbrella company
An umbrella calculator is a website tool or piece of software, commonly used by umbrella companies for “hire”, designed to permit the user to input their own fiduciary criteria and a number of other variables , such as their hourly income , number of hours worked and common costs such as overnight hotel bills and subsistence when away on business. Other variables you might put into an umbrella calculator will include business mileage and any other genuine business expenses. The primary use of an umbrella calculator is to use these variables to ascertain whether a person will be paid more working for an umbrella company or for themselves . The Umbrella calculator looks at all of the variables as well as the prevailing tax code and works out a net saving should the person opt for the umbrella company route .
As well as making use of an umbrella calculator, you would be well advised to ensure you understand and are wholly compliant with IR35. IR35 is the name given to a piece of British legislation created to make sure that those who are taken on by an umbrella company do not get an unreasonable advantage from their status . IR35 was introduced in 1999, before which time those who were employed by an umbrella company could legally take their salary as dividends , which were officially not liable for National Insurance payments. IR35 also worked against an umbrella company from being managed by different members of the same family, such that each of them might benefit from offsetting the company’s profits across each owner’s lower taxation echelons and personal allowances, which brought their their tax liability to the point of avoidance. In spite of regular consideration and review by intervening British governments, IR35 remains largely intact and also on the whole unchanged since its inception .