User:ChiltonHamilton3653 - Stanford PowerToAct

If you are employed on a contract basis or pay self employed tax, you run the risk of paying a good deal more self employed tax than you need to. By setting up an umbrella business you can work to simplify the processes through which you are reimbursed for your time , and take back many of your everyday overheads against tax . For example, if you were a consultant retained by an advertising business on a self employed basis, you might decide to set up and run an umbrella business which would be your employer on a permanent basis, and be reimbursed for your labour by the company to which you are contracted. The umbrella company could then salary you as an employee rather than as a casual labourer. The other big benefit to umbrella companies is that you can also, and very easily, declare legitimate operating costs as costs, which the umbrella firm would be capable to treat as performing costs, deducting them from the moneys received from the business to which you?re contracted previous to you are paid, and crucially, before before any sums as to your tax liability are made. The expenses that the umbrella business might be able to remove from your self employed tax in this way might include mileage or other travelling costs, your wifi at home if you have a home office. You could also have your umbrella company provide you with a company automobile and business telephone , and to all these benefits could be written down against your tax liability and will therefore reduce your tax burden . The advantages of establishing an umbrella company over paying out self employed tax aren?t just that the whole quantity of tax that you are liable for may be lesser , they also contain a considerable cutting of the red tape surrounding the self employed tax system , and can also get you access to some tax reliefs which are exclusively available for small businesses in certain industries . Less scrupulous end users of the umbrella company scheme might also make use of it to maximise their self employed tax relief by ?hiring? a spouse or relative as a company director or Finance Director. This third party is then remunerated by the umbrella business , instead of paying self employed tax. The money paid to the third party is really a proportion of the salary paid to the contractor by the contracting company, yet by dividing this money between two directors of the umbrella company you can take advantage of the untaxed income or ?personal allowance? to which we?re all entitled, with the first chunk of their income (today it?s the 1st ?7,475, from April 2012 it will rise to ?8,105, and with a further rise announced in the March 2012 budget) going untaxed.

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