Invoicing your clients
Umbrella companies often work closely with recruitment agents. You’ll send a timesheet to your umbrella company, and they’ll then pass this on to the recruitment agent for approval and payment. The recruitment agent will normally produce an invoice for you (“self-billing”) and send this back to the umbrella, along with payment. The umbrella company now hold your gross payment from your client.
Claiming expenses and mileage
You cannot claim expenses or mileage via an umbrella company unless your client has agreed to pay them. You cannot, for example, purchase a mobile phone, laptop or invest in training.
Calculating your taxes
The umbrella company will then perform a clever calculation to determine how much employment taxes are due – that’s employers National Insurance and the apprenticeship levy. This will often appear on your pay statement as a “service charge”, alongside the fee for the umbrella itself.
They will then calculate the tax due on the remaining amount as if it were your salary, so they’ll calculate employees National Insurance, income tax, pension payments and student loan repayments.
Paying your taxes
Each month your umbrella company will transfer your money to HMRC to pay your taxes – both employers and employees.
Getting a payslip
You’ll be given a payslip showing your income and deductions. The umbrella company will automatically transfer the net amount into your personal bank account. This is now yours to spend.