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When it comes to choosing an umbrella company, maximising take home pay is a priority for most contractors.
Unfortunately, schemes that advertise the best rates of take home pay are also the ones that will get you in trouble with HMRC.
Even though most of these firms claim to be ‘100% compliant’, the reality is that an umbrella company that can offer 90% take home pay simply can’t be conforming with tax regulations.
New research shows that more than a third of contractors have left self-employment because of changes to off-payroll working (IR35) rules.
A survey published by the Association of Independent Professionals and the Self-Employed (IPSE) shows that 35% of contractors no longer work for themselves.
As the government consults on plans to extend IR35 rules to the private sector, self-employment organisation IPSE claims that the changes could ‘strangle’ contractor living standards.
IPSE claims that the ‘inhibiting, anti-business’ policy could cost contractors an average of £14,000 per year in lost income.
Using average day rate (£430) and average weeks worked (42 weeks per year) figures from IPSE’s Freelancer Confidence Index, they calculate that a contractor’s take home pay will drop significantly.
After more than two years where remote work was the norm, many contractors are being recalled to client offices at a significant personal cost.
While there are benefits to working from a client’s site, many contractors are finding it difficult to swallow at a time when prices are increasing.
The government has issued a warning about agencies and umbrella companies that claim to be able to help you save on tax and boost your take home pay.
Although everything may look legitimate and above board, these companies actually run tax avoidance schemes that could land you with a bigger tax bill and penalties, HMRC said.
The ‘too good to be true’ schemes work in different ways, but operators usually promise to reduce your tax liability and help you keep more of your income.
We are often asked which umbrella company will pay me the highest net pay (highest take home pay).
