An umbrella company is a type of business structure often used by temporary workers, freelancers, and contractors. The contractor is technically employed by the umbrella company, which acts as an intermediary between the worker and the agency or client. The company handles payroll, taxes, and other administrative tasks for the worker, ensuring compliance with employment and tax regulations.
HM Revenue and Customs (HMRC) is aware that some umbrella companies are using employment and recruitment agencies to promote tax avoidance. HMRC has released a tool that will allow workers engaged with an umbrella company to spot signs of fraud and avoid tax avoidance schemes.
You can use this tool to estimate what gross and net pay (take-home pay) should be from an umbrella company for a single role. It will also tell you what deductions are applied to this pay.
Who should use the tool
Anyone working through an umbrella company can use the tool. You’ll get the most accurate results if you’re:
- aged 21 or over
- under State Pension age
This is because it works out pay based on category A National Insurance contributions.
You can also use this tool if you’re a recruitment agency, to estimate pay for an umbrella company worker.
Before you start
The tool can only work out pay for the current tax year.
You must have the assignment rate for the role. This is sometimes known as the uplifted rate, umbrella rate, day rate, or hourly rate.
You can find out the assignment rate from:
- the job advert for the role
- the employment business who found you the role
These documents, which you can get from your umbrella company, may help you use the tool:
- a payslip
- a pay statement, also known as a reconciliation statement
- an assignment schedule (you can also get this from your employment business)
Work out pay
This tool is anonymous. We will not collect any identifying details about you, or your umbrella company when you use it.
While the tool is designed for individuals, it can also be used by employment businesses and umbrella companies to check their own systems and processes if needed.