The short version: An umbrella company employs contractors and freelancers, handling their payroll so they don’t have to set up their own limited company. You’re technically employed by the umbrella, paid through PAYE.
Why use one?
Less admin than running your own limited company. Taxes are sorted for you. You get employee benefits like holiday pay and pension contributions. Useful for short contracts where setting up a company isn’t worth it.
What are the downsides?
You pay fees to the umbrella company. Less tax efficient than a well-run limited company. Less control over how you’re paid. You’re trusting someone else to handle your money correctly.
Are they all legitimate?
No. Some umbrellas use questionable schemes that can leave you with tax bills later. Check they’re FCSA accredited and avoid anything that promises unusually high take-home pay.
When might you use one?
Short term contracts, testing the waters as a contractor, or when an agency requires it. For longer term contracting, consider whether a limited company makes more sense.
Considering an umbrella company? Ask us whether it’s the right option for you.
