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Do I have to submit a tax return as an umbrella company worker?
As self assessment tax return season rolls around, one question that comes up is do umbrella company contractors need to complete a personal tax return.
The short answer is maybe. It completely depends on your personal circumstances and whether you’ve had any income in the tax year aside from what you earned through your umbrella company.
One of the advantages of working through an umbrella company is that it greatly simplifies taxation because everything is deducted at source. The umbrella company will remit your tax and National Insurance Contributions (NICs) directly to HMRC through the PAYE system.
However, if you have an additional revenue stream which isn’t taxed under PAYE, you may have to complete a self assessment tax return. This is a personal tax return which is filed online; you can do it yourself or get an accountant to prepare and submit it for you.
When do you need to do a personal tax return?
If your only income is paid to you through an umbrella company, and has been for the duration of the tax year in question, you shouldn’t need to submit a personal tax return.
However if you have any sort of side gig or additional source of income, HMRC will want to know and tax you on it. There are also other circumstances that require you to submit a self assessment – sometimes this may mean getting tax back if you have overpaid!
If any of the following apply to you, you may need to submit a tax return:
- You do any self-employed work
- You think you’ve overpaid tax (you may be due a rebate)
- You have operated a limited company and taken money as dividends
- You’re in receipt of rental income
- You’re in receipt of foreign income
- You access untaxed money, such as capital gains
- You have your own personal pension, or have private accounts / investments
- You want to claim tax relief on expenses incurred during the tax year
- You’re a high earner
- You or your partner are earning over £50,000 and are receiving child benefit.
Filing a personal tax return
If you have never filed a personal tax return before, you’ll have to register for self-assessment with HMRC. If you’ve registered before but didn’t file a return last year, you’ll have to reactivate your existing account.
Once you have registered you’ll be able to use the online service to file your tax return, view any returns you’ve made previously, check your tax calculation. You’ll need to sign in using your Government Gateway user ID and password. You’ll also need your Unique Tax Reference (UTR).
Too long, didn’t read?
Basically, if you’re contracting through an umbrella company but earning additional income somewhere else that isn’t being taxed, you may have to submit a personal tax return. If you aren’t sure, it is worth seeking the advice of an accountant or personal tax specialist.