Umbrella Companies for Self-Employed

Mohit Baheti | Debitam By Mohit Baheti |
Umbrella companies for self-employed | Debitam - Online Account Filing

Is it better if you are self-employed? Read it before making your choice.

What's an Umbrella Company?

An umbrella company is a business used to pay temporary workers through PAYE. Generally, the umbrella company becomes the employer for the worker, who will then be paid by them. This arrangement is commonly used by recruitment agencies and employment businesses to pay their workers.

Typically, umbrella companies do not find any temporary work for employees. Instead, they are usually hired by the recruitment agency to pay workers for the work that has been completed. This type of arrangement is most used on a short-term basis.

Are you self-employed if you use an umbrella company?

So if you’re wondering “Are you self-employed if you use an umbrella company?” the answer is yes - umbrella companies allow you to become self-employed, even if you are working through recruitment agencies.

By using an umbrella company, you can benefit from the flexibility of being self-employed while still gaining the security of a regular wage. It’s important to remember that umbrella companies do charge fees for their services, so it’s important to make sure you understand the costs involved before signing up with one.

Is Umbrella Better than Self-Employed?

Whether umbrella companies are better than self-employment depends on your individual needs and circumstances. The umbrella model takes away the responsibility of having to deal with tax and administrative issues, which can be a huge burden for those who are new to running a business.

  • Umbrella Companies Charge You: However, umbrella companies do charge fees for their services, so it’s important to weigh up the cost of services against the benefits of being self-employed.
  • Umbrella Companies Provide Tax Flexibility: Ultimately, umbrella companies can provide a great option for those who want to enjoy the flexibility of self-employment without taking on some of the more difficult aspects such as handling your payroll, tax admin and invoicing.
  • Umbrella Companies are helpful for National Insurance Contributions: The umbrella company deducts your tax and NIC, to find out more about National Insurance Contributions click here so it allows you to plan out your financial route more accurately, as the rest would be your take-home payment like an employee.
  • Umbrella Companies Provide You Employee Rights: The main benefit of using an umbrella company is that you are classed as an employee. This means that you will be provided with Employment Rights and Responsibilities, such as holiday pay and protection from unfair dismissal. It also gives you the security of having a fixed employer for tax purposes.

It’s important to remember that umbrella companies are not suitable for everyone, so it’s best to speak to an accountant or umbrella company directly if you’re considering this type of arrangement.

Is it better to be Paid by PAYE or Umbrella?

Your wages will usually be paid by the umbrella company via PAYE, so you won’t have to worry about handling your own tax affairs. However, it’s important to be aware that umbrella companies do charge a fee for their services, which may impact on the amount of money you take home each month.

Do Umbrella Companies Pay your Tax?

Umbrella companies will handle all aspects of PAYE on your behalf. This means that they will deduct Income Tax and National Insurance Contributions from your wages before paying you.

It’s important to remember that umbrella companies do not pay any additional taxes for you, such as Corporation Tax or Value Added Tax (VAT). You may need to consider setting up a Limited Company if you are required to pay these kinds of taxes.


Umbrella companies provide an easy way for those who are self-employed to gain the security of a regular wage and the flexibility that comes with being self-employed. However, it’s important to remember that umbrella companies do come with additional costs, so it’s important to understand the fees involved before signing up with one.

Umbrella companies can be a great solution for those who want to become self-employed but need some extra support when it comes to tax and administrative tasks. it’s important to make an informed decision before committing to one and you have nothing to lose by asking your accountant.

Mohit Baheti | Debitam By Mohit Baheti |
Note: Please note that the content of the above blog and the aforementioned information are solely for the purpose of awareness and are informative in nature. The content is designed with intent to ease the understanding while preserving the essence and importance of the compliance rules and shall not be considered as an ultimate replication of the rules. Debitam does not own any responsibility whatsoever for any unpleasant event that may arise due to the misinterpretation of a specific part or whole of the information.

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