Inside IR35, umbrella or PAYE?

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I may move to a contract role and it’s offered as inside IR35. I can select to be paid as PAYE or via an umbrella company. The difference in day rate is about £200 (more for umbrella).

Last time I contracted it was PAYE only so I’ve not had to decide before - I wondered if anyone could give their views on best approach / what you’d opt for?

Thanks!

Are they letting you choose the umbrella company?
I thought you paid the umbrella company to do your payroll...so you need to work out how much your taxes and holidays would cost and then take into account the charges the umbrella company will levy on top to administer payroll and see what the difference is. Paye is more straightforward but is it better value? - only you can work that out. Interested to hear other's opinions - we employ contractors who used to operate outside ir35 - they grumble a lot about paying taxes but none of them has suggested an umbrella and I suspect that is because they'd have to pay extra...we do not charge them payroll costs.

Morning @Glasspen thanks for sharing. They have a preferred one, but I believe you can opt for your own. It’s really hard to compare rates online (ie like when you get your car insurance), as you need to sign up for someone to call you back and then it’s all sales tactics.

I feel a bit that I’m so green to this as I’m fairly senior and have recruited contractors for years, but guess it’s a new situation for me. I’ll restart the Googling today!

The advantage of umbrella is you can put money in a pension via salary sacrifice, so you pay less tax and NI. So essentially between your salary and pension contributions you keep more if your day rate. It’s especially useful if you are in a higher tax band (>50k).
Try an online umbrella salary calculator to work out your take hone. The extra £200 covers employers NI, pension contribution and usually holiday pay and compare with a normal PAYE salary calculator.
I think most umbrellas will also pay your holiday upfront, i.e. add ca10% to your payslip (but then you don’t get paid when you’re off), whereas PAYE give you your holiday pay when you’re off. Some contractors have lost out that way, because they didn’t take their holidays but weren’t paid their time off in lieu either.
Depending on the umbrella the fee is between £15-£30 per payslip.
Choose your umbrella carefully, some offer tax saving schemes that are to be avoided if you don’t want trouble with HMRC.

The umbrella has a higher rate because the "employment" costs are passed on and paid by you via the umbrella.

I.e. if you're employed directly, it "costs" your client:

Employers NIC
Paid holidays
Statutory sick pay
Enhanced maternity pay (if applicable)
Workplace pension employer contributions
Apprenticeship levy.

If you work via an umbrella. the end client saves all that, hence paying the higher rate. BUT, you bear those costs instead, i.e.

Employers NIC
Workplace pension employers contribution
Holiday pay
Apprenticeship levies

And of course, you pay the umbrella company's admin/processing fee.

And you aren't eligible for the employers enhanced sick/maternity pay (if applicable).

To make a valid comparison, get a quote/illustration from the umbrella company as to how much "net" take home you'll actually receive from them, after their fees, employers NIC, apprentice levies, etc etc.

@Xanorra and @user1497207191, amazing, thank you! I ‘knew’ that but how you’ve both kindly set it out has made it click for me - that and maybe the gallon of coffee this morning!

Yes it’s a £50k++ role so it looks like umbrella would be preferred.

Really appreciate it.