Typical: 46-48 weeks (accounting for holidays)
Net Take-Home
£55,581.13
Total Deductions
£36,418.87
Daily
£241.66
Weekly
£1,208.29
Monthly
£4,631.76
Everything you need to know about umbrella company contracting
What is an umbrella company?
An umbrella company is a payroll intermediary that employs contractors and freelancers. When you work through an umbrella, the company becomes your legal employer. They invoice the recruitment agency or end client for your work, process your timesheet, deduct all applicable taxes and NI contributions through PAYE, and pay you a net salary. This is a common arrangement for contractors working on assignments inside IR35 or those who prefer not to run their own limited company.
What does the umbrella margin cover?
The umbrella margin is a weekly or monthly fee charged by the umbrella company for their services. This typically covers payroll administration, invoicing the agency or client, professional indemnity insurance, employer's liability insurance, HMRC compliance, pension auto-enrolment administration, and holiday pay management. Margins typically range from £20 to £30 per week, though some companies charge more for additional services.
Why is employer NI deducted from my pay?
When you work through an umbrella company, the assignment rate (your day rate multiplied by days worked) is the total amount paid to the umbrella. As your legal employer, the umbrella must pay employer National Insurance contributions on your earnings. Since the assignment rate is the only income available, employer NI is effectively deducted from your gross assignment value before your salary is calculated. This is different from permanent employment where the employer pays NI on top of your agreed salary.
How does an umbrella compare to a limited company?
Working through a limited company can be more tax-efficient because you can extract profits as dividends (taxed at lower rates than income tax) and claim business expenses. However, since April 2021 IR35 reforms, if your assignment is deemed 'inside IR35', the tax advantages of a limited company largely disappear. In that case, an umbrella company may be simpler and cheaper as you avoid company administration costs, accountancy fees, and compliance burden while achieving a similar net pay.
HMRC-Aligned: This calculator uses official HMRC rates and thresholds for the 2025/26 tax year (6 April 2025 - 5 April 2026). Results are indicative and may vary depending on your umbrella provider's specific processes. For complex situations, consult a qualified accountant.
This calculator uses official rates and thresholds from:
Last verified: February 2026 · Tax year 2025/26. Results are indicative — consult a qualified accountant for personalised advice.
Reviewed by M. Samiuddin Quadri, ACCA — Chartered Certified Accountant at Gladstone & Co. · Updated for the 2025/26 tax year.
Disclaimer: This calculator provides estimates based on current HMRC rates and thresholds for the 2025/26 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant or tax adviser before making financial decisions. Read our terms