An umbrella company represents a company that hires contractors and then “sends” those contractors to work for other companies. For the contractor, it’s a way to offer agencies and end-clients a simple method to retain their services without having to go the permanent employment route, which makes them more attractive. For agencies and end-clients, it’s a way of obtaining the talent they need without incurring employment issues and costs, especially for project-based jobs.

As the contractor, you will become the umbrella company’s employee, which means submitting timesheets to the umbrella company. The latter will then invoice the agency or end-client for the work you performed. Your income will be subject to the PAYE tax system and to the umbrella company’s fee.

You’ll generally be able to retain between 60% and 65% of the entire value of your contract by working under an umbrella company. You’ll be able to increase this percentage slightly as you’ll be allowed to claim certain basic expenses, though they will all have to be backed by receipts.

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