In this blog, we will explore how you can work under an umbrella company as a locum vet, and why you might choose to do so.
What is an umbrella company?
An umbrella company is a larger company that acts as an official employer to individual contractors. They are essentially a third-party that will handle your finances, paperwork and legal obligations on your behalf – including sending invoices and sorting out tax and National Insurance – but you can still operate as a locum vet.
What are the pros and cons of using an umbrella company?
An umbrella company is one of the main options available to locum vets, and it is favoured by many, but what are the advantages and disadvantages?
Pros
- It is very simple to set up as a locum vet under an umbrella company – you simply sign up with your chosen company and go from there.
- Your income tax payments and National Insurance are taken care of so you don’t need to submit a tax return.
- You can enrol on a pension scheme, as well as receive statutory holiday, sick and maternity/paternity pay.
- Some umbrella companies also offer additional benefits such as health insurance.
- There is much less paperwork involved!
Cons
- There may be less freedom as some companies have a minimum number of hours per month that you will be required to work.
- You must pay a fee to the umbrella company.
- In the past, it has not been as tax efficient as some other options, but that may not be the case anymore (more on this below).
What do the IR35 changes mean for umbrella companies?
As we explored in a previous blog, changes to IR35 rules that have now come into effect will have an impact on locum vets. The changes mean that it is the ‘end client’ (i.e. the vet practices) who determines whether or not a locum falls inside or outside of IR35, whereas this was previously done by the owner of the limited company (i.e the locum vet or vet nurse).
Since whoever is paying you will be obligated to deduct your tax and National Insurance, this eliminates the main benefits of using a limited company to operate as a locum, so it makes more sense to use an umbrella company. If you believe you would be at risk of falling inside the IR35 rules, it is best to use an umbrella company rather than setting up as a limited company.
If you choose to use an umbrella company, there will be no restrictions as to where and when you can work. You will have one set tax code to ensure you are paying the correct amount and a sole company in charge of your payroll, tax and NI contributions.
We hope this guide to working under an umbrella company as a locum vet has been useful. Here at Synergy Vets, we work with a number of locum vets and offer a full payroll service with a choice of ways to be paid, including through an umbrella company.
If you are interested, you are welcome to get in touch with us to find out more.