So what is an umbrella company? ... Umbrella companies employ contractors working on temporary engagements, invoice the client or agency on the contractor's behalf before paying the contractor minus PAYE costs, such as Income Tax and National Insurance contributions.

Is it worth working through an umbrella company?

Advantages of umbrella companies

Umbrella companies are a good solution if you are working on a short-term contract, or receive a modest hourly contract rate. You don't need to concern yourself with admin or paperwork, such as dealing with accountants, HMRC, or Companies House.

How does an umbrella company make money?

Typically, umbrella companies deal with the end-client on your behalf. They then pass the cost of doing this on to you and collect their fee from your client earnings. The good news is that they deduct the fee before they work out your taxable income. So, in real terms, you get some of the fee back by paying less tax.