You may be required to use an umbrella company, but how does umbrella payroll work? We have produced a quick step by step explanation to help you understand the processes involved. Don’t worry – umbrella companies are actually pretty straightforward.

How does umbrella payroll work? A step by step guide

  1. Contact the umbrella company you wish to join.
  2. Complete the registration documents and provide proof of ID. You’ll need to sign and return a contract.
  3. Make sure you receive confirmation that you’ve officially joined the umbrella. This usually arrives via email once you have completed the paperwork.
  4. Complete timesheets and get them signed by the relevant person.
  5. Send signed timesheets to your agency.
  6. Also, send signed timesheets to your umbrella company.
  7. The umbrella company will invoice your agency accordingly.
  8. Your recruitment agency will invoice your end client accordingly.
  9. Your agency pays the umbrella company your salary.
  10. The umbrella company makes the appropriate deductions to your pay (including tax and National Insurance Contributions) and then pays you your salary. The tax and National Insurance Contributions are sent directly to HMRC on your behalf.

It really is that simple! You will receive a payslip from your umbrella company and this will show the deductions that have been made to your pay. Deductions are likely to include:

  • Employees National Insurance
  • Employers National Insurance
  • Income Tax
  • The Apprenticeship Levy
  • Holiday Pay
  • Student Loan (if applicable)
  • Pension Scheme (if applicable)

If you are looking for more information on umbrella company payslips, please read the following article on the IT Contracting website – How to understand your umbrella company payslip.

Hopefully you can now answer the question – ‘how does umbrella payroll work?’ However, if you still have some questions, please check out the Umbrella Company UK FAQs.

Make sure you do not use tax avoidance schemes

The above is a perfect example of how a compliant umbrella company processes your pay. However, please be aware that there are unethical companies out there who are trying to target contractors and freelancers. These companies are offering you the opportunity to retain up to 90 percent of your salary after tax. In truth, they are actually tax avoidance schemes that could land you in serious trouble with HMRC. Don’t take any risks and do not engage with tax avoidance schemes.

Have you heard of the 2019 Loan Charge? It is legislation designed to target those who have engaged with tax avoidance schemes since 1999 and it is also designed to ensure nobody uses tax avoidance schemes now and in the future.

Read our blog ‘Are you affected by the 2019 Loan Charge’ for more information.

Umbrella Company UK

Umbrella Company UK will take care of your payroll efficiently and reliably. When you register with us, you will instantly have access to:

  • £25 million free insurance cover
  • Employee Benefits including Sick Pay, Maternity and Paternity Pay
  • Same Day Faster Payments
  • Your own dedicated Account Manager
  • Transparent payroll with no hidden fees (including no joining or leaving fees)

To find out more information or to register with us today, please call our friendly and professional team on 01707 669023 or complete the short form on this page.

Contact Us Today!

If you have any questions about joining an umbrella company or IR35, please give our friendly team a call on 01707 669023 or complete the short form below.

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