Should you consider using an umbrella company?

One of the many questions that you need to ask yourself before you begin contractor work is whether or not you should use an umbrella company. Within this article we are going to go through reasons as to why you should as well as a small guide on what would be the better option for you.

Umbrella companies are here to provide you with a service, however, that service always does come with a cost. Within the question asked, you need to work out for yourself if whether using an umbrella company is worth the costs. To do this you might want to take a look at your personal finances over the last few years, as well as, your possible future endeavours. One thing we will say is that you cannot be expected to be hired while you have the bare minimum work experience needed for the client. Umbrella companies only hire trained professionals.

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Are you just starting out as a freelancer?

If you decided to recently start out then you are probably wiser going with an umbrella company because, setting up a limited company isn’t likely going to be worthwhile with your money. More experienced contractors do eventually set up their own limited company and work like that. Take a look at our very own take home pay calculator and work out how much you could be taking home today!

What you need to understand is that when you first start out you won’t be extremely well off. In fact, your daily rate will be relatively low, therefore setting up your own limited company wouldn’t be the best option for yourself. Most freelancers that start out don’t have the necessary experience and qualifications right away to be earning big money. That’s why an umbrella company is your best bet if you are just starting.

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What sort of expenses can you claim through an umbrella company?

One of the best reasons to join an umbrella company would be the expenses all umbrella company employees can claim back or receive tax relief. However, having the ability to accurately estimate your expenses before you take on the job is going to be a big help for you and won’t make you as much of a liability to yourself as a contractor.

An expense that can be claimed however, is quite difficult to do so because HMRC are extremely strict on this matter is travel expenses. How HMRC see expenses are as follows; if you cannot do your job without paying expenses like branded clothing etc then you are more likely to be reimbursed.

Travel expenses however are some of the most difficult type of expenses to claim. The reasoning behind this is because HMRC see that travelling from your home to your work place as not a travel expense. One way to get around this is to hold onto a “travelling appointment” as this makes the contractor have the ability to deduct all of their travelling expenses as performance of the job requirements. An employer also doesn’t have the ability to argue with this either.

What we are trying to say is that if you cannot fulfil your job requirements without paying this expense then you are more than likely to be accepted for a tax relief.

So, how exactly do you claim travel expenses?

business man holding an umbrella with thundershower background

As we have mentioned, it can be pretty difficult however it is manageable. The key to it is the frequency that you travel and the nature of the kind of work that you might be doing too. Also, if you are working incredibly far away from your home you might be able to claim these expenses. If you are self-employed as a contractor or freelancer and you are completing multiple jobs on the same day for the same client. Then you are eligible for expenses claim.


If you are still unsure about joining an umbrella company is a good idea or not then feel free to fill out any of our contact forms on our website here. One of our incredible team will get back to you and help out as much as we can.

To really answer the question that we asked at the start of this article though is something that you as a contractor need to do some research. There are loads of umbrella companies in the United Kingdom, having a look through as many as you can is a very smart thing to consider doing. Figure out first if you are going to want to work in the private sector or the public sector, as a contract of employment can differ in every organisation in both of these sectors.