An umbrella company is basically an agent between you and your clients.It acts as your employer to collect payment from your clients and than pay you a salary after deducting their commission tax and National Insurance. If you want to operate through an umbrella company as a contractor you Will have to submit a timesheet and details of all work-related expenses to it.
Advantages of umbrella company
1- it easy and simple use. The umbrella company takes responsibility for all the paperwork, tax and accounting matters.
2- once you receive your salary there will be no further deductions.
3- it provides a platform for people who want to try out contracting but are not ready to take responsibility for running a limited company.
The disadvantages of umbrella company
1- less control compared to running your own limited company.
2- reduced take home money as paying commission on top of tax and NI.
3- fewer tax planning options.