Should I use an umbrella company to get paid?

We don’t think so. In fact, we would be glad to publish any reasoning from any umbrella company as to why a locum would want to use an umbrella company to get paid.

Look at the facts. Assuming you do 20 weeks in a year at a rate of £1,000 a week, your annual income is going to be £20,000.

Your tax on this as a self-employed person is going to be negligible. The first £10k’ish is tax-free, and the remainder is done at the basic rate of income tax. Your national insurance contributions will be minimal and you can knock off plenty of expenses before getting taxed – speak to an accountant about the expenses to be deducted.

An umbrella company sets you up as a limited company and handles all your administration including PAYE. You basically become an employee of the limited company.

So essentially the umbrella company will issue weekly invoices, submit an annual self-assessment to HMRC and pay both your national insurance and income tax. And that’s it.

The umbrella company takes a fee from your hard-earned locum monies for work you could quite comfortably do yourself.

We have only come across a few locums using an umbrella company for a very long time in recruitment. In that instance, we don’t think the locum gets any benefit at all. Add in the annoyance factor – umbrella companies will ring the business you work for, pester them for payment and lots of detail, chase you up as well, and generally be a nuisance to everyone.

Alternatively you could simply issue an invoice at the end of each week, get the amount agreed, get paid 3 days later and send us a copy of the invoice on a monthly basis. At the end of the year you fill out a self-assessment form online.

If anyone knows of a reason to justify the use of one of these companies, please let us know and we’ll publish it on our site.