IR35 has had a profound impact on the contracting world over the past almost 25 years. How do these tax rules affect umbrella company employees?
Umbrella Companies
Virtually all IT contractors work via limited or umbrella companies. In this section, we explore how PAYE umbrella schemes work.
- Find out what a PAYE umbrella company does.
- Why you should be cautious when reading umbrella company reviews.
- How much do the leading umbrella companies charge?
- The pros and cons of using an umbrella company.
- Why the scope for claiming umbrella company expenses has narrowed due to the SDC rules.
- What does this mean? Our umbrella company glossary.
- Which structure is best for you? Limited or Umbrella?
- Umbrella company comparison - 15 top tips
- Calculate your net take home pay here.
5 essential tips to help you find the best umbrella
- Don't focus purely on the weekly cost. Good customer service and communication skills are just as important. Ask other contractors for recommendations if you're looking for a new provider.
- Only sign-up to a UK-based PAYE umbrella. Never use offshore payment tax avoidance schemes.
- The only difference between take home pay quotes between umbrella companies should be the margin (fee) they charge.
- If you're caught by the Off-Payroll (IR35) rules, consider a flexible umbrella/limited model of working, so you can switch between the two with ease. Most leading accountants/umbrellas offer this service.
- Find a trusted umbrella in our umbrella directory.
What tax do you pay if you’re an umbrella company employee?
When you work through an umbrella company in the UK, you are an employee for tax purposes. This means you must pay income tax and NI on your earnings.
Umbrella companies – ‘gross contract rate’, ‘umbrella rate’, ‘assignment rate’ – what’s the difference?
If you are quoted an umbrella or assignment rate, then this is deemed to meet all employment costs before the taxable salary is arrived at.
Agency Workers Regulations (AWR) – guide for umbrella employees
Although the AWR legislation is complex, the premise is simple: to protect temporary workers employed via staffing agencies. Read our contractor summary.
The Key Information Document explained for contractors and agency workers
Agencies must provide contractors with a Key Information Document. Learn what a KID covers, how it works in 2025, and what to check before signing.
Can my agent force me to use a particular umbrella company?
If you contract through a recruitment agency and want to use an umbrella, can the agent insist you use a provider on their preferred supplier list (PSL)?
What to do if your umbrella company goes bust
When an umbrella company goes bust or enters liquidation, hundreds of contractors can be left without pay. This scenario can cause great concern.
Umbrella company fees explained: types, costs, and pitfalls
The only legitimate way PAYE schemes can compete with each other cost-wise is in the fees they charge their contractor clients. Here, we compare some of the leading umbrella companies, and explain why you should look out for hidden charges.
Why a cheap umbrella company isn’t necessarily the best option
Price is always an important factor when you’re looking for a new umbrella provider. But it shouldn’t be your sole consideration.
Umbrella companies – how preferred supplier lists (PSLs) work
Recruitment companies often operate preferred supplier lists of umbrella companies they work with. Here we consider PSLs work in reality. And what happens if a candidate wants to use a different umbrella?