Umbrella Supermarket forecasts trouble ahead - time to get out ?
The recent newsletter from Umbrella Supermarket , the self styled Umbrella Company watchdog sent out their regular newsletter with a link to an article that only members can see which forecasts problems in the Umbrella Market as the recession tightens.
The newsletter which reports on the purchase of accounting firm QuayAccounting by Parasol forecasts that Umbrella Company numbers coulddecline as the recession bites and concludes with the words "If indoubt, rush out. In other words move β and quickly. Itβs by far yoursafest bet" - ominous words indeed from Umbrella Supermarket.
Maybe this is a time when the big distinction between an UmbrellaCompany and running your own business is becoming even more important,and the question to ask is "Who has control over your money" .
Umbrella Companies control your money.
Professional Contractors and Freelancers using a Limited Company control their own money.
If an end client or agency goes out of business and doesnt pay, the situation is equal between the two in most cases.
In my view surviving a recession is partly to do with riskreduction and cash conservation. Professional Conractors andFreelancers who have taken the so called easy option of an UmbrellaCompany, may want to start to look at running their own business.
Luckily it is even easier now, with FreeAgent bundled in our Professional Service you can run your own business efficiently and at fees that are less than a major Umbrella Company.
Importantly, a Limited Company Inside or Outside IR35 will always (I mean always ) return more net income than an Umbrella Company payingyou expenses and paye. There are good reasons for this:-
1. Your Limited Company can be VAT registered ( You make money from this, rather than the Umbrella Company !)
2. You can tax plan more effectively as you can choose when to have your income
3. Dividends do not attract NI, your PAYE salary from the UmbrellaCompany attracts Employers NI ( 12.8%) and Employees NI ( 11%).
4. The legislation arround expenses are the same between an Umbrella Company and your own Limited Company !
5. If you run your own business quite often you can claim more ( anddifferent things ) that you can with an Umbrella Company who is actingas your employee !
6. Inside IR35 in your own Limited Company will always return morenet income than an Umbrella Company because of the 5% deduction foroverheads and all the reasons above.
Please take a look at our spreadsheet calculator that you candownload from our Business Library > Tools and Documents Folder ifyou register on our website. Just by entering your contract rate and monthly expenses you can clearly see how much you can gain.
One last point is that the decision to run your own business is notall about the money; you need to be aware that there areresponsibilities attached, but there is plenty of help at hand, andplenty to gain !
If you are already running your own business then maybe forward thisto your colleagues who are using an Umbrella Company, it is; asUmbrella Supermarket is saying, time to be ready for some changes.
If you are a client and would like any advice regarding UmbrellaCompanies please contact your Personal Accountant. If you are notcurrently a client, please feel welcome to book a free initial consultation with me.
By Phil Richards