What is an Umbrella Company?

An umbrella company is a type of company that acts as an employer for contractors, freelancers, and other self-employed individuals who work on a temporary basis. It provides administrative, financial, and legal support to these individuals, allowing them to focus on their work without having to worry about managing their own company.

Under an umbrella company, the individual becomes an employee of the umbrella company, which then enters contracts with clients or agencies on their behalf. The umbrella company handles all invoicing, accounting, and payroll for the individual, deducting taxes and national insurance contributions before paying them their salary. This makes it easier for individuals to manage their finances and comply with tax regulations.

In exchange for its services, the umbrella company charges a fee, which is usually deducted from the individual’s salary. This fee covers the costs of administration, legal compliance, insurance, and other expenses associated with operating the umbrella company.

Overall, an umbrella company provides a convenient and flexible way for self-employed individuals to work on a temporary basis while still receiving the benefits and protections of employment.