Using the services of an umbrella company can be highly beneficial for contractors working through agencies. These companies are designed to streamline the contracting process and offer support in various aspects of contracting. One significant area where they assist is in managing expenses.
Additionally, umbrella companies can offer valuable guidance and access to competitive business insurance coverage. This includes advice on the type of Umbrella Policy needed to safeguard contractors from potential financial losses in case of unexpected claims. Having the right insurance coverage is crucial for contractors to work with confidence and peace of mind.
While the umbrella company typically covers its employees with liability insurance, additional insurance for specific business needs may be required. For instance, if you’re in a profession that demands regular travel, having insurance that covers your equipment or offers protection against unforeseen circumstances becomes paramount. Similarly, for those in niche industries, such as the transportation sector, exploring tailored insurance options is vital. So, if you’re operating a taxi business, ensuring that you have taxi driver insurance in Texas (or wherever you operate) is not just a recommended expense; it’s a legal requirement. Choosing the right insurance for your business ensures you’re compliant with regulations while safeguarding your business against potential risks. Understanding the nuances of business insurance and its claimable expenses is a strategic move for individuals working under an umbrella company.
Before working with such a company, it’s worth looking at the benefits that come with using an umbrella contractor service. The process of calculating PAYE, National Insurance contributions, invoicing clients and collecting and filing claims can prove to be time-consuming, especially if you are trying to do it all by yourself. However, making the decision to use an umbrella company means that you become an employee of the umbrella company and as with any employer they calculate your PAYE and National Insurance contributions for you, at source. They also help you to claim allowable business expenses to ensure you get the best possible take home pay.
Using an umbrella company will free up more time that can be devoted to other professional responsibilities, for instance attempting to secure future contracts and working on current projects, so it is an option well worth considering.
Once you have registered, you will need to submit details of the expenses you incur on a regular basis, along with your timesheets to show how many hours you have put in, to the umbrella company. From here, your clients will receive an invoice and your income will be paid into your bank account.
However, what precisely counts as an allowable business expense? Although you likely already have an idea of what these are, it is worth developing a firm understanding well in advance to avoid confusion and ensure that you are filing everything that can be classified as an allowable business expense. After all, you wouldn’t want to discover later that you have been spending significant sums of money on things without realizing you could have claimed tax relief on them. To prevent such situations, consider seeking business consulting Ipswich by Scrutton Bland or a similar firm to gain expert guidance on allowable business expenses and tax relief strategies. These professionals can provide clarity on the intricate details of expense categories, helping you maximize your potential tax savings.
Remember that the types of expenses differ from industry to industry; therefore, it’s imperative to work closely with professionals who specialize in your specific field. This ensures that you have a nuanced understanding of allowable expenses tailored to the unique requirements of your industry. For example, expenses for contractors are defined as being ‘incurred wholly, exclusively, and necessarily in performing their duties’. Common expenses include travel costs and hotel accommodation used on business trips.
For clarity, expenses for contractors are defined as being “incurred wholly, exclusively and necessarily in performing their duties”. Common expenses include travel costs and hotel accommodation used on business trips.
There are some cases where you might not need to submit some receipts as part of the dispensation scheme offered by HM Revenue and Customs (HMRC) to obtain the tax relief, however you must always get receipts for every expense you will be claiming for and keep them safe.
This means National Insurance does not need to be paid on certain expenses and benefits, while you might also not have to enter it on to the P11D or P9D forms that you may have to submit to the tax body at the end of the financial year. However, you should always keep hold of these receipts, as HMRC may still request that you send these out at a later date.
Your ability to make such claims, however, will vary depending on the value and type of expense that you wish to file for. As a general rule, it is a good idea to speak to either your umbrella company or accountancy service provider for advice about what is permissible for you to claim based on your particular circumstances. In doing so, you will have the confidence of being able to handle all your tax commitments in an efficient, cost-effective manner.
What are your experiences of claiming expenses when using an umbrella company? Leave a comment and let us know.