93% of contractors thought about using an umbrella company last year
Following the introduction of new IR35 rules in April, more than 90% of contractors thought about ditching their limited companies for umbrellas in 2021.
New rules affecting private sector clients mean that contractors are much more likely to be judged ‘inside IR35’ when starting a new contract.
Inside IR35 contractors have to pay higher rates of income tax and National Insurance Contributions, meaning take home pay is significantly reduced. Crucially, however, these contractors don’t enjoy the same rights as regular employees.
Facing this bleak reality, as many as 95% of contractors say they considered leaving the temporary work force altogether. But many contractors have been able to reduce the impact of the new rules by working through umbrella companies.
Some 93% of contractors said they have considered using an umbrella company to avoid IR35 and more than half (53%) have done so. The highest proportion of new umbrella contractors (72%) work in the property and construction sector.
Umbrella companies allow contractors to work for clients and get paid without using their own limited company. It helps temporary workers cut down on administration while also taking advantage of employee rights and other benefits that come with umbrella employment.
Miles Grady, Director of Umbrella.co.uk, said: “It’s no surprise that the vast majority of limited company contractors have thought about making the switch to umbrella working.
“Joining an umbrella company is not right for everyone. If you can continue working ‘outside IR35’ then it’s probably more financially beneficial to do so, but if you’re trapped inside IR35 with no reasonable means of escape then it’s definitely worth speaking to an expert.”
For more information about IR35 and working through an umbrella company, speak to a member of our team today. Call: 0800 121 6513.