{"id":951,"date":"2024-07-24T00:00:00","date_gmt":"2024-07-24T00:00:00","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/articles\/what-is-an-umbrella-company\/"},"modified":"2026-01-21T14:58:53","modified_gmt":"2026-01-21T14:58:53","slug":"what-is-an-umbrella-company","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/what-is-an-umbrella-company\/","title":{"rendered":"What is an umbrella company? (2026 updates)"},"content":{"rendered":"\n<div id=\"cg_test_gate\" class=\"wp-block-group is-layout-flow wp-block-group-is-layout-flow cg_test_gate\">\n<p class=\"wp-block-paragraph\">Contractors have a number of options when it comes to getting paid and making sure they pay their taxes correctly. One of these is umbrella companies.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They\u2019re particularly useful for new contractors or those planning to work on shorter assignments and don\u2019t want to deal with the administrative burden of filing taxes themselves. Let\u2019s take a closer look at how they work and why a contractor might choose to use one.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"#what-is-an-umbrella-company\">What is an umbrella company?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#why-use-an-umbrella-company\">Why would you use an umbrella company?&nbsp;<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#how-to-get-paid-umbrella-company\">How you get paid by an umbrella company&nbsp;<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#umbrella-companies-ir35\">Umbrella companies and IR35<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#joining-umbrella-company\">What happens when you join an umbrella company?<\/a><\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group has-azure-300-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-69910985 wp-block-group-is-layout-constrained\" style=\"border-radius:10px;padding-top:var(--wp--preset--spacing--20);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--50);padding-left:var(--wp--preset--spacing--90)\">\n<h2 class=\"wp-block-heading\" id=\"h-new-2026-legislation-for-umbrella-companies\"><strong>New 2026 legislation for umbrella companies<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">New legislation will define umbrella companies as employment companies, which will be included in the Employment Rights Act. Umbrella companies will now:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">be regulated under the Employment Agency Standards Inspectorate, resulting in more rights for contractors<\/li>\n\n\n\n<li class=\"wp-block-list-item\">see the responsibility for PAYE contributions moved away from the contractor to the recruitment agency or umbrella company<\/li>\n\n\n\n<li class=\"wp-block-list-item\">see workers right be more comparable to direct hires, with a new Fair Work Agency set to oversee this<\/li>\n<\/ul>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is-an-umbrella-company\"><strong>What is an umbrella company?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">An umbrella company, or PAYE umbrella, is a company that self-employed contractors can join as an alternative to <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/setting-up-a-limited-company\/\" data-type=\"knowledge\" data-id=\"1270\">setting up (and working through) their own limited company<\/a> or remaining a sole trader.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When you join an umbrella company, you become their employee. The umbrella acts as an intermediary between you and your recruitment agency (or end client). It deals with administration (like <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/best-small-business-accounting-software-uk\/\" data-type=\"knowledge\" data-id=\"1262\">accountancy<\/a> and taxes) and means you don\u2019t have to take on the responsibility of running your own <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/what-is-a-personal-service-company\/\" data-type=\"knowledge\" data-id=\"945\">personal service company<\/a>.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When you join an umbrella company, their fees are typically deducted from your pay. Your recruitment agency may have their own trusted list of umbrella companies, or you can find your own.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"why-use-an-umbrella-company\"><strong>Why would you use an umbrella company?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Running a limited company can be challenging and won\u2019t always be the best choice for contractors. Some contracts won\u2019t allow you to remain a sole trader, and if they do, filing your own taxes can be fiddly.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So in some instances, an umbrella company might give you what you need. For example:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">short-term contracts \u2013 if you\u2019re a new contractor, you might not want the hassle of <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/setting-up-a-limited-company\/\" data-type=\"knowledge\" data-id=\"1270\">setting up a limited company<\/a> straight away \u2013 and dealing with everything alongside it, like <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/how-to-register-with-companies-house\/\" data-type=\"knowledge\" data-id=\"850\">registering with Companies House<\/a>. Likewise, if you know you\u2019ll only be contracting for a short time, you won\u2019t want to go through the process of setting up a limited company only to dissolve it in the future<\/li>\n\n\n\n<li class=\"wp-block-list-item\">reduced administration \u2013 you can reduce administration by using an umbrella company. It means you won\u2019t have to <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/how-long-to-keep-tax-records\/\" data-type=\"knowledge\" data-id=\"1407\">keep company records<\/a>, file VAT returns, and keep up with all the other responsibilities you would have as a limited company director<\/li>\n\n\n\n<li class=\"wp-block-list-item\">employment rights \u2013 as an employee of the umbrella, you can get <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/ssp-rate-how-much-is-statutory-sick-pay\/\" data-type=\"knowledge\" data-id=\"1222\">statutory sick pay<\/a>, holiday pay, maternity and paternity pay, and a workplace pension (unless you opt out). Technically, this means enjoying the flexibility of self-employment while also experiencing the same benefits and security of permanent employees<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"What is IR35? \u2013 IR35 explained for self-employed people\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/JWsHdU0p15g?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n<\/div>\n\n\n\n<div id=\"nba-body-001\">\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-to-get-paid-umbrella-company\"><strong>How you get paid by an umbrella company&nbsp;<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When it comes to getting paid, the contractor keeps timesheets showing the days and hours worked and rates used, which they give to the umbrella company.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Then they pay you through PAYE, deducting the below:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">income tax<\/li>\n\n\n\n<li class=\"wp-block-list-item\">employee National Insurance contributions<\/li>\n\n\n\n<li class=\"wp-block-list-item\">employee workplace pension contribution<\/li>\n\n\n\n<li class=\"wp-block-list-item\">student loan repayments (if applicable)<\/li>\n\n\n\n<li class=\"wp-block-list-item\">any other deductions that you\u2019ve agreed to or are legally required to pay<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">You should also be aware that umbrella companies do charge fees for membership. This can either be a fixed fee, weekly or monthly, or a percentage of your earnings. This percentage is usually capped, though.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"umbrella-companies-ir35\"><strong>Umbrella companies and IR35<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A contractor can work on contracts both inside and outside IR35, as IR35 status applies to contracts and not to the contractor themselves.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can still run a limited company and work on inside IR35 contracts. You can even run a limited company and work through an umbrella company at the same time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, umbrella companies are particularly useful for contracts deemed to be <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-happens-if-im-inside-ir35\/#what-does-inside-ir35-mean\">inside IR35<\/a> \u2013 as it\u2019s a simple way to ensure you\u2019re paying the right amount of income tax and National Insurance contributions.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You may want to use an IR35 contract review service to make sure you know whether you\u2019re inside or outside the rules and how you need to be paying tax and other contributions.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When it comes to contracts that are outside IR35, in some cases using an umbrella company isn\u2019t the most tax efficient option to pay yourself, so you might choose to create a limited company. Though umbrella companies can be useful if you\u2019ve just started contracting or will only be contracting for a short period of time.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"joining-umbrella-company\"><strong>Working through an umbrella company: a step-by-step guide<\/strong><\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">When you secure a role, your umbrella company signs a contract with your recruitment agency (or end client). You\u2019ll also need to sign a contract with your umbrella.<\/li>\n\n\n\n<li class=\"wp-block-list-item\">You agree to the time spent on site working on projects and document this in timesheets, which you pass to your manager to sign.<\/li>\n\n\n\n<li class=\"wp-block-list-item\">You pass your timesheets to your umbrella (and recruitment agency if you have one), who invoice the client.<\/li>\n\n\n\n<li class=\"wp-block-list-item\">When your umbrella gets the payment, they\u2019ll process your payroll. You\u2019re paid a salary, which deducts income tax, National Insurance contributions, pension contributions, and the umbrella fee. You can reclaim allowable expenses, which your umbrella should process too.<\/li>\n\n\n\n<li class=\"wp-block-list-item\">Your umbrella gives you a payslip that shows your take-home pay as well as all the deductions.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Use this as a guide only and keep in mind the right choice for you will depend on your circumstances \u2013 it\u2019s best to research your options and speak to a professional if you\u2019re not sure.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-other-self-employment-guides-nbsp\"><strong>Other self-employment guides:&nbsp;<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a data-type=\"knowledge\" data-id=\"1270\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/setting-up-a-limited-company\/\">Setting up a limited company\u00a0<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a data-type=\"knowledge\" data-id=\"1514\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/self-employed-tax-changes\/\">How to do a self-employed tax return<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a data-type=\"knowledge\" data-id=\"1431\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/how-to-file-company-accounts\/\">How to file company accounts<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a data-type=\"knowledge\" data-id=\"1532\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/sole-trader-vs-limited-company\/\">What\u2019s the difference between a sole trader and a limited company<\/a><\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-94e519ba wp-block-group-is-layout-constrained\" style=\"padding-top:var(--wp--preset--spacing--80);padding-right:var(--wp--preset--spacing--40);padding-bottom:var(--wp--preset--spacing--80);padding-left:var(--wp--preset--spacing--40)\">\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"lookingforselfemployedinsurance\">Looking for self-employed insurance?<\/h3>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\">With Simply Business you can build a single <a href=\"\/business-insurance\/self-employed-insurance\/\">self employed insurance<\/a> policy combining the covers that are relevant to you. Whether it&#8217;s <a href=\"\/business-insurance\/public-liability-insurance\/\">public liability insurance<\/a>, <a href=\"\/business-insurance\/professional-indemnity-insurance\/\">professional indemnity<\/a> or whatever else you need, we&#8217;ll run you a quick quote online, and let you decide if we&#8217;re a good fit.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/quote.simplybusiness.co.uk\/business\">Start your quote<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n<div id=\"nba-body-end\">\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Umbrella companies can help self-employed contractors pay their taxes correctly, and come with employee benefits too. Find out how umbrella companies work. <\/p>\n","protected":false},"author":52,"featured_media":2991,"comment_status":"open","ping_status":"closed","template":"","meta":{"sb_hreflang":"","sb_hreflang_url":"","disable_breadcrumbs":false,"sb_breadcrumbs":[],"sb_reviewed_by":"rosanna-parrish","sb_review_date":"2026-01-21T14:57:17","sb_enable_content_gating":true,"footnotes":""},"categories":[336],"hidden-category":[],"coauthors":[186],"class_list":["post-951","knowledge","type-knowledge","status-publish","has-post-thumbnail","hentry","category-business-structure"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What is an umbrella company? (2026 updates)<\/title>\n<meta name=\"description\" content=\"Umbrella companies can help self-employed contractors pay their taxes correctly, and come with employee benefits too. 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(2026 updates)\" \/>\n<meta property=\"og:description\" content=\"Some contractors use an umbrella rather than setting up their own company.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/what-is-an-umbrella-company\/\" \/>\n<meta property=\"og:site_name\" content=\"Simply Business UK\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/simplybusiness\" \/>\n<meta property=\"article:modified_time\" content=\"2026-01-21T14:58:53+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.simplybusiness.co.uk\/wp-content\/uploads\/sites\/3\/2024\/06\/what-is-an-umbrella-company.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@simplybusiness\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n\t<meta name=\"twitter:label2\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data2\" content=\"Lucy England\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/what-is-an-umbrella-company\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/what-is-an-umbrella-company\/\"},\"author\":{\"@type\":\"Person\",\"name\":\"Lucy England\",\"description\":\"Lucy England has been writing for and about small businesses for around ten years. 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