Umbrella Company
Our service arm, operates as an umbrella company.
An umbrella company is a business that employs temporary workers or contractors on behalf of
recruitment agencies and end
clients. Instead of setting up your own limited company, you become an employee of the umbrella
company, which handles your payroll, tax, and National Insurance contributions.
This arrangement is common in the UK for agency workers, contractors, and freelancers who work on temporary assignments.
How it works
An umbrella company is often a good choice if you:
- Are new to contracting.
- Work through recruitment agencies.
- Want minimal administration.
- Prefer employment rights and tax certainty.
- Take short-term or occasional contracts.
A limited company may be more suitable if you are an experienced contractor with long-term contracts and are comfortable managing business administration.
If you're considering contracting in the UK, I can also explain how umbrella companies affect your payslip and what deductions you should expect to see.
The steps
- You find a contract through a recruitment agency.
- The agency agrees a rate with the client.
- The umbrella company employs you.
- The agency pays the umbrella company.
- The umbrella company deducts PAYE tax, National Insurance, and any agreed fees.
- You receive your net pay through payroll.
Benefits of using an umbrella compant
1. Simplicity
2. PAYE Employment
3. Employment Rights
4. IR35 Protection
5. Faster Start-Up
6. Proof of Employment
Disadvantages to consider
1. Lower Take-Home Pay
You are taxed under PAYE, so your take-home pay is usually lower than that of some contractors operating through a limited company.
2. Umbrella Fees
The umbrella company charges a weekly or monthly fee.
3. Less Control
You cannot decide how and when to take income in the same way as a limited company director.
Umbrella Company vs Limited Company
Umbrella Company
Easy to set up
PAYE employee
Tax handled for you
Employment rights
Usually lower compliance risk
Limited Company
Usually lower compliance risk
Company director
Responsible for accounts and taxes
Fewer employment protections
Greater flexibility and potential tax efficiency