Using an Umbrella Company – Who Pays Me?

(4 minutes to read)

Working through an umbrella company is a great solution for professionals who want the flexibility of being self-employed, but without the administrative burden that comes with it.

Umbrella company pay – how does it work?

Unlike a limited company contractor or sole trader, an umbrella company contractor doesn’t need to worry about completing an annual tax return.

Each year, a self-employed worker will need to file a self-assessment that will include all of their financial information from the last 12 months. These records will be sent to HMRC who will notify the worker of the amount of tax they owe, which will need to be paid by the 31st January.

For an umbrella company contractor, this process is simplified due to the fact that you are essentially employed by your umbrella company and therefore paid the same way as any other permanent worker.

For more information on umbrella companies, you can read our How Umbrella Companies work page

How do you get paid through an umbrella company?

The umbrella company will provide you with a payslip – they will pay you for the work you do for an employment agency’s client and will deduct any income tax or National Insurance Contributions (NICs) due, as well as administration costs.

Your payslip will include your contract pay (before and after any deductions), the number of hours you’ve worked and the amount of deductions.

The amount you get paid will usually be set at an hourly rate that should be at the National Minimum Wage – check GOV.UK to ensure that you’re being paid the correct amount. 

Am I entitled to holiday pay?

As mentioned previously, you are employed by your umbrella company, which means that you are also entitled to holiday pay – this statutory annual leave will be based on the hours you work.

To find out the other benefits of being an umbrella company contractor, read our Why use an Umbrella Company? page for more information.

Tax avoidance schemes 

Although most umbrella companies will be legitimate and compliant with tax rules, it’s important to be aware that if a company isn’t adhering to certain rules, then it could very well be working as a tax avoidance scheme.

These are the red flags you should be looking out for:

  • If there’s a third party in the chain making the payment.
  • If the umbrella company claims that you’ll be able to keep more of your earnings than others.
  • If you’re asked to sign an annuity, loan or other agreement which involves a non-taxable element of pay.

If you think your umbrella company might be a disguised remuneration arrangement, the risks really aren’t worth it – being caught out means that you’ll have to pay the tax that you owe, plus interest and even a penalty. For more information, read our What is a loan scheme and why you shouldn’t use one page.

If you suspect that there may be non-compliance happening then you should contact HMRC as soon as possible by reporting it via an online form on the GOV.UK website.

We hope this page has answered some of your umbrella employment questions. Our team of experts are available to answer any queries you may have, so drop us a line on 01206 591 000 or email

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