Umbrella company deductions: what they can and can't take
An umbrella company makes two sets of deductions. From the assignment rate the agency pays it, it takes its margin, employer National Insurance, employer pension, holiday pay and, if it applies, the Apprenticeship Levy. What's left is your gross pay. From your gross pay it takes only your tax, your employee NI, your pension, any student loan and anything you've agreed to. Employer costs never come out of your gross pay.
What to look for
Employer NI: 15%, before your gross pay
Employer National Insurance is 15% of pay above £96 a week in 2026 to 2027. It belongs in the assignment-rate breakdown. The NI line on your payslip should be employee NI only.
The Apprenticeship Levy: 0.5%
The levy is charged at 0.5%. gov.uk lists it with the deductions from the assignment rate, "if applicable". It is not a line to take from your gross pay.
Who answers for your PAYE
Since 6 April 2026, if an umbrella doesn't pay the right PAYE, HMRC can recover it from the agency that holds the contract with the end client, or from the end client if there's no agency. The umbrella is still your employer and still has to pay you correctly.
Questions people ask
What's a key information document?
The agency must give you one before you start. It names the umbrella company and shows the minimum assignment rate, what the umbrella will deduct and your minimum gross pay. Hold your first payslip up against it.
My NI looks too high. What should it be?
Employee NI only: 8% of what you earn between £242 and £967 a week, and 2% above that, in 2026 to 2027. gov.uk says the NI taken off your gross pay should always be employee NI, not employer.
What if my pay is less than I was told?
Speak to the umbrella company first and ask for the breakdown from the assignment rate to your gross pay. If that doesn't sort it, Acas, Citizens Advice or your union rep can help, and you can report concerns to HMRC.
They've offered a payment that's "not taxable". Is that normal?
gov.uk warns that a separate payment you're told isn't taxable, like a loan, or being paid more than your payslip shows, can be a sign of a tax avoidance scheme. You are the one responsible for paying the right tax.
Where these facts come from
- HMRC: Working through an umbrella company
- HMRC: PAYE rules for labour supply chains that include umbrella companies from 6 April 2026
- HMRC: Rates and thresholds for employers 2026 to 2027
This is a check against published rules, not legal or tax advice. If you're in a dispute, ACAS, a union or an adviser can act for you.