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How does an Umbrella Company calculate my take home pay?

You have, no doubt, seen adverts from Umbrella Companies along the lines of ‘more take home pay’ and ‘take home 85%’; have you ever wondered how they come up with their figures?

All UK Umbrella Companies – I’ll repeat that – all UK Umbrella Companies operate PAYE. This means that you will pay your tax as you go along in exactly the same way as a permanent employee. However, and this is vitally important, ALL Umbrella Companies operate under the same rules and regulations which means that there are no magical formulas, no elaborate schemes and no creative accounting.

Your National Insurance contributions are deducted as a percentage of your earnings this percentage is identical for all companies. Income tax calculations are a little more complicated; this is essentially how it works.

Everyone has a tax code which determines their tax-free pay e.g. the standard tax code for 2016/17 is 1100L, which means you can earn £11,099 in a year before you have to start paying income tax.

Every pound you earn over your tax-free allowance will be taxed at 20% up to £32,000; every pound you earn between £32,001and £150,000 will be taxed at 40% and finally, any earnings above £150,000 will then be taxed at 45%. For a more detailed guide to PAYE tax download our free guide.

ContractorUmbrella has service guarantees, if we don’t live up to our promises to you we don't get our margin - it's as simple as that!

Interested in the net pay you can receive through an Umbrella Company? Try our online calculator for an accurate estimate.

Alternatively, you can speak to a member of our team on 01206 713680 or email us on

Have you heard the phrase ‘Umbrella Company dispensation’? Not sure what it means? View our Umbrella Company Dispensations – Exposed page.