Home Contractor Advice A new umbrella company guide for contractors has grabbed our attention

A new umbrella company guide for contractors has grabbed our attention

A new umbrella company guide for contractors has come to light

We recently wrote a post about a ground-breaking umbrella report by the LITRG – and it’s an awesome read. However, we’ve come across another new guide that tackles several complex topics surrounding umbrella companies and we wanted to share this with our readers too. The guide, a 45+ page PDF available to view and download for free, was put together by the team at umbrellacompanies.org.uk. In the document, several interesting topics are covered, including how umbrella companies work, the advantages and disadvantages, how holiday pay is processed, and more. It’s a helpful resource, and we recommend you check it out.

If we find a useful resource for UK contractors – we’ll share it

The UK Contracting Support Website is here to share valuable news and resources with contractors and freelancers – to help make life easier. Therefore, as soon as we came across this report entitled ‘The Complete Umbrella Company Guide’, we wanted to make you aware of it. How did we find it? Easy – Twitter!

You can view the guide on the umbrellacompanies.org.uk website by clicking here.

Dozens of areas covered

The guide has well over a dozen categories, and it covers some “hot topics” associated with umbrella companies. Perhaps most importantly, the guide briefly explains holiday pay through an umbrella company and how it should be processed. We’ve focused on this section of the report because holiday pay has recently been a contentious topic – as a leading umbrella company has been accused of pocketing funds that should have been paid to their employees.

The sections in the guide are as follows:

  • What is an umbrella company?
  • How do umbrella companies work?
  • Umbrella company example
  • Registering with an umbrella company
  • Umbrella company take home pay calculations
  • Holiday pay with umbrella companies
  • Umbrella company expenses
  • Umbrella company margin
  • Employment costs
  • Umbrella company payslips
  • Advantages of using an umbrella company
  • Disadvantages of using an umbrella company
  • IR35
  • Tax avoidance and disguised remuneration
  • Compliance within the sector

Umbrella companies are growing in demand

It’s no secret that umbrella companies have seen a significant increase in demand over the last couple of years. IR35 changes have resulted in tens of thousands of contractors, freelancers and agency workers requiring a PAYE payroll service to work on temporary assignments. In this scenario, umbrella companies are a popular choice.

You may be amazed to discover that a recent report by the Low Incomes Tax Reform Group (LITRG) concluded that over 600,000 temporary workers require an umbrella company’s services for their payroll, and there are over 500 providers to choose from.


While most umbrella companies are compliant and follow HMRC’s rules and regulations, a few are promoting tax avoidance schemes. You should never be tempted to use a tax avoidance scheme because not only are you ignoring your implication to contribute to the UK; you could face severe financial penalties in the future. It’s best to avoid any payroll company that’s offering you the opportunity to retain an inflated rate of your pay. Most tax avoidance schemes will be based offshore in a known tax haven such as the Isle of Man or the Cayman Islands. We recommend you do your research and only consider using an umbrella company that’s well-established in the UK, has a good reputation, and is accredited by a reputable professional body.

The UK Contracting Support Website team will continue to keep their eyes open for more resources that could help UK contractors and freelancers make informed decisions regarding their payroll. Remember, you should never be pushed in the direction of an umbrella company or payroll provider if you’re not comfortable, but providing you choose a compliant business – you shouldn’t have anything to worry about.

Have you found some useful resources?

The UK Contracting Support Website is a resource for contractors and freelancers. If you ever come across something that’s been created by a third party that’s really useful – please share it with us and we’ll write a blog to ensure it’s shared with our wonderful readers! Send an email to info@ukcontracting.co.uk.

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