As remote working becomes a more established form of employment among the UK’s workforce, a greater number of individuals are considering or finding themselves able to pursue freelance work. While this has been encouraged by the country’s pandemic lockdown, due to a greater number of permanent positions becoming scarce, the flexible and often remote nature of freelance working has been in motion for a long while. Individuals have found themselves better able to take on the challenge of freelance independence with the tools of technology, as well as a wider range of platforms and networks dedicated to connecting them with temporary contracts.
There are many benefits to freelance working, notably the ability to choose the exact work you take on, meaning that your working hours, location, and client are each within your control. However, in order to pursue the freedom of work, a freelancer is still obligated to perform certain tasks, which includes organising and managing invoices, tax, and payments.
Understanding your freelance payroll obligations is a necessary endeavour. Failing to do so, keeping yourself compliant with tax regulations, could incur a considerable fine or penalisation. Recently, one specific tax law, the now-infamous IR35, has undergone major changes and, as of April 2021, will expand its reach to include a greater number of contractors and freelance workers around the UK. This is just one of the potential changes and pitfalls that freelance workers face, which is prompting them to choose umbrella payroll options instead of setting up their own limited company.
The fundamental benefit of opting for umbrella payroll is that, as a freelancer, your financial responsibilities are consolidated and managed by a single, external company. Choosing this an option, such as with umbrella payroll from People Group Services, means that your invoices and salary will be taken care of through PAYE methods, making sure to include all contributions to national insurance and other tax obligations, which not only alleviates you of the time and work that would have been required to do so yourself but ensuring that it is done promptly and without error.
Alongside this administrative relief, as a freelancer working with an umbrella company, you will also be able to claim certain benefits that are otherwise standard to employees, such as sick pay and annual leave, including paternal and maternal support. Some companies will also offer various forms of insurance coverage for your work and position.
However, before you choose an umbrella payroll, it is important to understand your own needs. Depending on your income, alternative options, such as establishing your own limited company, might be more tax-efficient. Other factors, such as the number of contracts and assignments you are taking on within your business, will also influence your options. To ensure that you take home the most money possible from your earnings, it is best to consider your structure and needs. Many umbrella payroll providers will be glad to support your understanding of the decision, so be sure to discuss your situation with them before settling on your choice.