How it works
The agency pays the umbrella company for your work. The umbrella employs you, runs PAYE and pays you, after deducting employer costs such as employer's National Insurance, the apprenticeship levy, pension and its own margin.
Check your payslip
- Income tax and National Insurance should be deducted through PAYE.
- The umbrella's margin and employer costs should be clearly shown.
- Your pay should never be split into a small 'salary' plus a large untaxed 'loan', 'bonus' or 'advance'; that's a sign of a tax avoidance scheme.
Changes from April 2026
From April 2026 the recruitment agency (or the end client, if there's no agency) becomes responsible for making sure the right PAYE tax is paid on work done through an umbrella company. Check GOV.UK for the latest guidance.
A worked example
An agency pays your umbrella company £18 an hour for 40 hours, so £720. That isn't your gross pay. The umbrella first takes its costs: employer's National Insurance, the apprenticeship levy, an employer pension contribution, holiday pay set aside and its own margin, often £15 to £30 a week. Your gross pay is what's left, and income tax and your own National Insurance come off that.
Ask for a Key Information Document before you start. It must show an example of your take-home pay and every deduction.
Warning signs
- Take-home pay that looks too good to be true compared with other umbrellas
- Payments described as loans, advances, credits or bonuses that aren't taxed
- Being asked to sign documents saying you'll never have to pay back a 'loan'
- No payslip, or a payslip that doesn't add up to what you received
If something's wrong
HMRC publishes the names of tax avoidance schemes and their promoters. If you think you're in one, contact HMRC early. It's usually much easier to sort out before a large tax bill builds up.
Keep your own record
Log each shift as you finish it in Shiftaan and you'll always know which ones are still unpaid. Start free, no card needed.
Common questions
Is it legal to be paid through an umbrella company?
Yes. Most umbrella companies are legitimate. Be wary of any that pay part of your money as a loan or untaxed 'advance'.
What is a Key Information Document?
A document your agency must give you before you agree to work, showing how you'll be paid, who pays you and an example of take-home pay with every deduction.