Every contractor needs to consider seeking the services of an umbrella company. The benefits to be gained are monumental. All of your taxes and invoices will be dealt with. You never have to worry about paperwork again. You don’t need to set aside money to cover your taxes. All you need to do is submit your timesheet and expenses. It is as simple as that. The umbrella company then does everything for you.
However, one of the reasons many contractors do not go down this route is because there is a lot of confusion regarding how much they should pay the company. This is because there are those that promise to lower the taxes you pay, then there are those that say this is impossible. Then there is the vast diversification regarding fees. No wonder people are confused! However, by the time you finish reading this post, you will have all the information you need to understand the payment process better.
Firstly, let’s clarify one thing. The only diversification is in regards to the fees charged by the company. No matter what umbrella company you choose your taxes is going to be the same. There is absolutely no way a company can lower your taxes. Just think of it like this… Who is responsible for setting your tax rate? The government. There are no companies that have the power to alter legislation in place by the government. Therefore, those companies who promise to lower your tax rates are merely using this as a way to try and entice you into using their services. Don’t be fooled by this.
Right, now onto the next point; how much should you be paying an umbrella company for their service? Well, firstly let’s start by stating that you can pay umbrella companies on a weekly or monthly basis. Secondly, don’t opt for a company that charges you relative to what you earn. Why should you have to pay more because you have earned more? Instead, look for an umbrella company that charges a fixed rate to all. This should be immediately visible on their website. This way you know the company is operating via complete transparency and that nothing untoward is going on.
It is much more cost-effective to go for the monthly option, however, this is not always feasible for some. No matter what route you go down, sit down and consider your finances. Businesses have a lot of expenses, and while your umbrella company will manage this, you need to understand your costs so you know what sort of umbrella business you can afford. From the Spanish-speaking answering service you outsource to your cleaning company, consider all of this, and then determine what’s left financially.
Hopefully, this blog post will now have cleared up any confusion you were experiencing surrounding umbrella companies and the fees they charge. Remember; they cannot lower the taxes you pay. Nonetheless, they can offer diversification when it comes to the fees charged.