I receive a lot of messages and questions around this. So I’m hoping I can help to explain the differences.
When you decide to become and agency social worker there are a number of things you need to consider. Please also see checklist to becoming an agency social worker. This will help to guide you through the steps you will need to take.
One of the biggest decisions you will face when you decide tot become an Agency Social Worker is whether you want to use an Umbrella Company or whether you want to set up a Limited Company. You need to decide what will be best for you, as this may differ from other colleges.
Whilst people seem to think that there are only two options there are actually three;
1) Sole Trader
2) Umbrella Company
3) Limited Company
So lets explore each one;
1) Sole Trader
Please note that if you are registered as a Sole Trader you will still be an independent worker but will not be working through an Agency. This will be an agreement that you have made independently.
As an independent Social Worker you will get paid be your ‘client’ and your money will be transferred straight into your personal bank account. This means that you keep all of the profits but you are solely responsible for sorting you tax duties at the end of each year from completing the ‘Self-Assessment tax return’. As a Sole Trader you are still responsible for paying National Insurance and also Income Tax.
This is the least preferred option for Social Workers as it is quite easy to get in a muddle. You are more likely to pay more tax after your first year of trading as a Sole Trader and if you owe any money this will then have to come from your personal money to settle this. You really need to stay on top of things and that you will be taxed every year so it’s not all your money that is coming in, and it does need to be paid.
2) Umbrella Company
This is honestly the easiest option. It would be the preferred choice if you are planning to be an Agency Social Worker for a short time. It is also a good idea to start with an Umbrella Company if you are unsure whether you want to be an Agency Social Worker long term until you have seen what it’s like. Many people start working under the Umbrella Company and then later transfer to a Limited Company after they’ve decided they want to continue doing this. This way you can still work and get paid until your business account and Ltd Company is set up.
Once you have signed up to an Agency they will recommend this option to you they will ask whether you want to be referred to their Umbrella Company. Please consider that some agencies to try and push you to do this as they will receive commission if you sign up with their Umbrella Company. If you have any questions or require any support around agencies please contact me.
There are fewer things to worry about under an Umbrella Company and they take charge and sort your tax, National Insurance and deal with HM Revenue for you. It is less stressful and they pay you on a weekly basis. They do deduct a fee and this can sometimes be around £60-£100 per week dependant on the Company and this does add up quickly.
3) Limited Company
I honestly feel that this is the best option if you are planning to be an Agency Social Worker for some time. There are ways to set up your limited company. Or, you can pay a small fee of around and have someone do this for you. It’s completely up to you. Please contact me if you have any questions around this.
This route requires you to have a better understanding and involvement with your LTD Company and also depends on what you are willing or not willing to do. I always say to people that if you want to set up a Limited Company get started as soon as you can. My business account for example took 6 weeks to set up. Some are quicker than that but you don’t want a delay in pay once you have started working. A dedicated business bank account is also essential If you’re setting up a limited company. If you’d like to move faster – consider using a company that will both incorporate you and set you up with a bank account. Most bank accounts have introductory offers e.g. 0% rates for the first year. Again, contact me if you have any questions around this.
If you set up a LTD Company this means that you are now a Company Director. It does involve you needing to have the right support and this can be done through an accountant. You can then be more efficient with your tax and have access to claim more expenses for your business.
This does involve you keeping on top of your account, knowing what you have available and you do need to file accounts and tax returns on a yearly basis. These are all things that your accountant will be able to support you with.
Do I need to be IR35 Compliant as an Agency Social Worker?
I receive many questions around this. This is only relevant if you have a Limited Company. Make sure you discuss this with your accountant and they will be able to explain this to you in more detail.
This is to do with the contract that the agency provides us. It is important that it proves that we are self-employed and working for ourselves. It needs to show that you are working for yourself and that you have control of the work that you do, where you work and also that you have the choice to accept or decline such work. You need to go with an agency that it well known and has a good reputation but also make sure you seek some support around this prior to singing a contract.
As I always say please contact me if you have any questions.