What is an Umbrella Company?

How do umbrella companies work?

In the UK, an umbrella company directly employs contractors and freelancers who work inside the IR35 regulations. Generally, an umbrella company's services are administrative and accountancy-based - such as managing timesheets, calculating PAYE tax and NI contributions, invoicing the client, collecting monies and paying the contractor.

Why choose an umbrella company?

An umbrella service gives you legal employee status and handles all the paperwork. It's the simplest solution for most contractors, with no unexpected tax bills and because you have one continuous employment it's much easier to secure important things like loans and mortgages too.

What is an umbrella company?

Our Lead Accountant, Vicky Knight, explains what exactly an umbrella company is and whether this could be the right choice for you.

What happens when you join an umbrella company?

If you're new to contracting, then working under an umbrella company is arguably the best way for you to work. But what exactly does this involve?

Step 1

When you decide to join an umbrella company, it becomes your employer.

Step 2

The umbrella company invoices the agency or end client and the agency or end client pays the money direct to the umbrella company.

Step 3

The umbrella company will then deduct PAYE and National Insurance contributions before paying you your wage.

How does our My Max umbrella service work?

An umbrella company will employ you under a contract of employment, so whether you carry out one assignment or 100, you will be employed under the same contract. An umbrella company also covers all of the payroll and administration aspects associated with working on temporary assignments, while also providing you with the usual employment benefits.

Want to understand how the umbrella process works from beginning to end?

We've explained the full process for you in this simple infographic.

Download infographic

What are the advantages and disadvantages of using an umbrella company?

Let's weigh up the pros and cons

Try our new umbrella take home pay calculator

We'll give you a quick estimate of how much you can expect to take home on a weekly or monthly basis.

Calculate your take home pay

What expenses can you claim through an umbrella company?

Let's take a look

Maggie's first steps into umbrella contracting

Maggie recently decided to enter the world of contracting and found that her role fell inside IR35, meaning she had the choice of agency payroll or an umbrella company. Maggie chose the umbrella company route and decided to work through PayStream’s My Max umbrella service. We asked her how she found the set-up process and how life has changed since becoming an umbrella contractor.

Download the case study

Have another question for us?

Read our umbrella company FAQs