Umbrella company costs & fees explained

Before you join an umbrella company, you should know exactly what leaves your contract rate and where it goes. It comes down to three things: the umbrella's margin, employer costs, and your own PAYE deductions. Anything beyond those is a red flag.

1. The margin — the umbrella's fee

This is the only money the umbrella keeps. It comes in two forms:

• Flat fee: a fixed amount per week or month — typically £15–£30 per week or around £100 per month. The cost is the same whether you earn £300 or £3,000 a week. This is what we recommend.
• Percentage fee: a cut of every invoice, e.g. 2–5%. The more you earn, the more you pay — £150+ per month is easy to hit on a good rate. Avoid.

2. Employer costs — paid from your assignment value

Because you're an employee, the umbrella must pay Employer National Insurance — 15% on earnings above £5,000 in 2026/27 — plus the Apprenticeship Levy at 0.5%. These are funded out of your contract value before your salary is calculated. Every umbrella, and every agency payroll, works this way. If a provider pretends these costs don't exist, they're hiding something.

3. Your own PAYE deductions

Exactly like any job:

• Income tax — 20% / 40% / 45% bands with a £12,570 personal allowance.
• Employee National Insurance — 8% between £12,570 and £50,270, 2% above.
• Student loan repayments and pension contributions, if they apply to you.

Your holiday pay (12.07%) is also built into your assignment rate — it isn't an extra cost, it's your own money paid back to you during time off.

Unexpected costs to avoid

• Joining or setup fees. Legitimate umbrellas don't charge to add you to payroll.
• Exit fees or minimum terms. You should be able to leave with a P45 and no penalty.
• "Insurance" add-ons. PI, PL and EL insurance should be included in the margin — not an upsell.
• Processing or admin fees. Payslips, RTI filing and HMRC payments are the job you're paying the margin for.

What about expenses?

Since 2016, umbrella workers under supervision, direction or control (SDC) can't claim travel and subsistence tax relief. You may still be able to claim mileage (45p per mile tax-free, first 10,000 miles) where SDC doesn't apply, plus training and equipment genuinely required for your role. Anyone promising more than that is selling you a tax problem.

What a fair deal looks like

• Flat margin of £15–£30 per week, stated upfront.
• No setup, exit or minimum-term fees.
• Insurance included.
• Same-day or next-day payment once funds arrive.
• A payslip you can read, with every deduction itemised.

See what that means in pounds for your day rate with our umbrella calculator — then get a quote and we'll show you the same breakdown provider by provider.