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With the new year now in full motion, many workers are looking to explore new options for the next step in their careers. This article outlines helpful advice on how to get started as a first-time contractor in 2025.<\/strong><\/p>\n As a first-time contractor, it can be challenging to know what your options are when it comes to receiving your payments. However, this decision is not just down to you. A key factor in how you can receive your payments is dependent on the IR35 status of your contract<\/strong><\/a>.<\/p>\n IR35 was introduced to regulate the contracting world better and avoid contractors being able to operate as if they were regular employees for their end client without paying the same amount of taxes, thus operating as \u201cdisguised employees\u201d. Since the IR35\u2019s beginning in April 2000, the legislation has evolved and now covers different sectors differently. Contractors whose contract is determined to be \u201cinside IR35\u201d must be paid via Pay As You Earn (PAYE)<\/strong><\/a>, whereas those \u201coutside IR35\u201d can choose to open a limited company and draw dividends as its director. Your end client determines the IR35 status for your contract.<\/p>\n Luckily for first-time contractors, no matter whether you are considered \u201cinside IR35\u201d or \u201coutside IR35,\u201d an umbrella company can pay you via PAYE \u2014the easiest way to be paid as a contractor.<\/p>\n Once you sign up with an umbrella company, you will be legally classified as their employee, meaning that contractors who sign up with Churchill Knight Umbrella have employment benefits just like permanent employees. The umbrella company will get you to complete a quick onboarding process as you would any permanent role, while at the same time getting in contact directly with your agency or end client to get the details of your assignment organised. Once you start your contract, the umbrella company will either send your timesheet details or receive them from your agency in preparation for your funds to be sent across. Once the funds are received, your payroll is run and you will receive your payment and a payslip for that period in the same day.<\/p>\n Many recruitment agencies refer their candidates directly to a set list of umbrella companies, known as a Preferred Supplier List (PSL), to ensure that the contractor is registered with an umbrella company that has a good working relationship with the agency and a high level of compliance. If you find an agency which does not have Churchill Knight on their PSL, we may still be able to work with them. In this case, you should provide us with the agency\u2019s details and we will can contact the agency directly.<\/p>\n If you are required to use an umbrella company for an assignment, make sure your recruitment agency or your end-hirer issues you a Key Information Document (KID). A KID will show you essential information about your assignment rate and pay, as well as your employment circumstances. You should be issued a KID for every new temporary assignment.<\/p>\n When choosing to contract through an umbrella company, keeping things as compliant as possible is vital. HMRC investigates contractors who do not pay their required level of taxes, with the possibility of more tax being reclaimed and the potential for criminal convictions. HMRC highlight their guidelines<\/strong><\/a> very clearly on their website; umbrella companies found to be running a tax avoidance scheme are listed<\/strong><\/a> alongside the details of their noncompliance.<\/p>\n Churchill Knight Umbrella prioritizes compliance to ensure optimal payroll processing and peace of mind for contractors. Our dedication to compliance has led to our gaining and maintaining accreditation from the FCSA<\/strong><\/a>, the leading awarding body in the umbrella industry.<\/p>\n Churchill Knight has also utilised the latest technology, SafeRec<\/strong><\/a>, to offer real-time auditing of all payslips issued to contractors. This allows contractors to ensure that their payroll is being processed in accordance with HMRC\u2019s strict guidelines.<\/p>\n For contractors working on assignments \u201coutside IR35\u201d, it may be preferred to set up a limited company (referred to as a personal service company \u2013 PSC). A PSC is considered the most tax-efficient method of operating because it allows the director to pay themselves with a combination of salary and dividends.<\/p>\n For more information about contracting with a limited company, please visit our contractor accountancy page<\/strong><\/a>.<\/p>\n Every month, we process the payroll of thousands of workers operating inside IR35. We\u2019re dedicated to ensuring we provided the very best service in the sector, and when you choose us, you\u2019ll be in the safest hands.<\/p>\n Many new contractors may be amazed at how much they can charge for their time. Although it is well known that contractors can earn considerably more than permanent employees, it is essential to understand the difference between an assignment rate and your net pay.<\/p>\n The rate stated in your contract will be considered your assignment rate. Your assignment rate is the rate at which the agency or end client has agreed to pay your limited company or umbrella company for your services. However, this is subject to taxes alongside regular deductions. For example, suppose you are using an umbrella company. In that case, you will be subject to employment costs: Employer\u2019s NI (currently 13.8%, moving to 15% for the tax year 2025\/26<\/strong><\/a>), Apprenticeship Levy<\/strong><\/a> (paid by all contractors at 0.5%), and the umbrella company margin<\/strong><\/a> (usually a fixed amount or percentage of your pay each time your payroll is run). All umbrella companies charge a margin as the only amount they earn from running your payroll.<\/p>\n Once these deductions are made, a contractor with an umbrella company can have their pay processed as PAYE to include personal deductions (such as Employee\u2019s National Insurance and Income Tax). This will give you the amount of take-home pay for that period. All umbrella companies will issue a payslip that breaks down all costs and deductions.<\/p>\n For a tailor-made illustration of your take-home pay with Churchill-Knight Umbrella, fill out our online form here.<\/strong><\/a><\/p>\n The contracting world is not shy of having regular new updates to keep abreast of. The 2024 Autumn Budget saw an array of announcements by the new Labour government, including the crackdown on compliance in the contracting world, and the increase of Employer\u2019s National Insurance.<\/p>\n Although the increase in the Employer\u2019s NI is unlikely to affect the normal wages of a regular, permanent employee, contractors must be particularly aware as the deduction of the Employer\u2019s NI is from the assignment rate as part of the employment costs. When the Employer\u2019s NI increase comes into effect in April 2025, a contractor\u2019s take-home pay will decrease to allow for the increased rate. Contractors beginning their contracting journey need to be aware of these updates and be able to speak openly to negotiate an increase in rate with their agency or end client if no agency is involved.<\/p>\n Some useful websites for keeping up to date with the latest contracting updates are IT Contracting<\/strong><\/a>, <\/strong>Contracting Eye<\/strong><\/a> and Umbrellacompanies.org<\/strong>.<\/a> For more information, keep an eye out for our regular blog posts where we report on the latest industry news, and see our dedicated page of FAQs<\/strong><\/a>.<\/p>\n Founded in 2017 to provide compliant and efficient payroll for contractors and freelancers in the UK, Churchill Knight Umbrella is an industry-leading PAYE umbrella company. We\u2019re proud to be an accredited member of the Freelancer and Contractor Services Association (FCSA<\/strong><\/a>) and a SafeRec Certified Umbrella Company<\/strong><\/a>.<\/p>\n Registering with Churchill Knight Umbrella is easy and our friendly team is on hand throughout the process. Please call 01707 871622<\/strong><\/a> or register now, or complete our short online registration form<\/strong><\/a>. If you would prefer to request a free, tailored take-home pay calculation, please click here<\/strong><\/a>.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":" With the new year now in full motion, many workers are looking to explore new options for the next step in their careers. This article outlines helpful advice on how to get started as a first-time contractor in 2025. Know your options: umbrella company vs limited company As a first-time contractor, it can be challenging […]<\/p>\n","protected":false},"author":1,"featured_media":45179,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11759],"tags":[18968,22469],"dealstore":[],"offerexpiration":[],"class_list":["post-45178","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","tag-contractor","tag-firsttime"],"yoast_head":"\nKnow your options: umbrella company vs limited company<\/strong><\/h2>\n
Working through an umbrella company (inside IR35)<\/strong><\/h2>\n
Ensuring compliance with an umbrella company\u00a0\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0<\/strong><\/h2>\n
Director of a personal service company (outside IR35)<\/strong><\/h2>\n
What are the benefits of working as a contractor with Churchill Knight Umbrella? <\/strong><\/h2>\n
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Assignment rate vs net pay (when using an umbrella company)<\/strong><\/h2>\n
Keep up to date with the latest news<\/strong><\/h2>\n
Ready to get started?<\/strong><\/h2>\n