Umbrella or PAYE: what does an agency worker take home?

Through an umbrella company, the assignment rate has to pay the umbrella's margin, 15% employer NI, often the 0.5% Apprenticeship Levy and the employer pension before the worker's gross pay is set. On PAYE, the agency pays those costs on top of the rate. Income tax and employee NI then work the same way on both.

Last checked 27 October 2026. General information, not legal or tax advice.

Umbrella vs PAYE calculator

The figures loaded are an example, not typical market rates. Put in your own.

Assignment rate the agency pays the umbrella (£ an hour)

PAYE hourly rate to compare (£ an hour)

Basic rate before holiday pay.

Hours in the week

Umbrella margin (£ a week)

From the umbrella's Key Information Document.

Where the worker lives

Scotland has its own income tax bands. NI is the same everywhere.

Worker pension contribution (%)

Of qualifying earnings. The legal minimum is 5% with a 3% employer contribution.

In the workplace pension

Employer pays 3% of weekly earnings between £120 and £967.

Umbrella deducts the Apprenticeship Levy

0.5% of gross pay, taken from the assignment rate. Tick it if the umbrella's Key Information Document shows it.

Agency pay bill over £3m (PAYE route)

Adds the levy to the agency's cost on PAYE. It does not change the worker's pay.

Result

Take-home £530.43 a week through the umbrella and £529.75 on PAYE at £15.00 an hour: £0.68 a week more through the umbrella.

Umbrella take-home a week£530.43

PAYE take-home a week£529.75

Umbrella basic pay an hour£15.02

PAYE rate at the same agency cost£15.46

One week of 40 hours, 2026/27 rates
Line	Umbrella	PAYE
Paid by the agency	£800.00	Rate plus costs
Umbrella margin	-£20.00	None
Employer NI	-£86.61	£86.46 (agency)
Apprenticeship Levy	-£3.37	None
Employer pension	-£16.60	£16.57 (agency)
Basic pay	£600.89	£600.00
Holiday pay	£72.53	£72.42
Gross pay	£673.42	£672.42
Worker pension	-£27.67	-£27.62
Income tax	-£80.80	-£80.61
Employee NI	-£34.51	-£34.43
Take-home a week	£530.43	£529.75
Take-home per hour worked	£13.26	£13.24
Cost to the agency a week	£800.00	£775.46

Employer NI is 15% above £96 a week, the levy 0.5% of gross pay, employer pension 3% and worker pension 5% of earnings between £120 and £967 a week, and holiday pay 12.07%, rolled up. (agency) means the agency pays it on top of the PAYE rate.

For the same cost to the agency as the umbrella route (£800.00 a week, with no umbrella margin), a PAYE rate of £15.46 an hour would take home £543.90 a week. Tax is worked as if this week repeats all year on tax code 1257L with no other income and no student loan. Pension is taken before tax (net pay arrangement). An estimate, not tax advice.

Rates for 2026/27, checked 27 October 2026. This is an estimate, not tax advice.

Sources: GOV.UK employer rates 2026 to 2027, GOV.UK Income Tax rates, TPR contributions.

Why the same rate gives different take-home

An umbrella company employs the worker and is paid by the agency at an assignment rate. That rate is not the worker's pay. It is the pot the umbrella pays everything from: its own margin, then the employer's costs, then the worker's gross pay. On PAYE through the agency, the hourly rate is the worker's pay, and the agency pays the employer's costs from its own margin.

Cost	Umbrella route	PAYE through the agency
Umbrella margin	Taken from the assignment rate	None
Employer NI, 15% above £96 a week	Taken from the assignment rate	Paid by the agency on top
Apprenticeship Levy, 0.5%	Taken from the assignment rate if the umbrella passes it on	Paid by the agency, only if its pay bill is over £3 million
Employer pension, 3% minimum	Taken from the assignment rate	Paid by the agency on top
Holiday pay, 12.07%	Paid from what is left, rolled up or held back	Paid by the agency, accrued or rolled up
Income tax, employee NI, worker pension	Deducted from gross pay	Deducted from gross pay

So comparing a £20 assignment rate with a £15 PAYE rate is not comparing £20 with £15. The calculator works out what is left at each step, and also shows the PAYE rate that would cost the agency the same as the umbrella route.

The 2026/27 rates the calculator uses

Income tax bands below are on taxable income, which is income above the Personal Allowance of £12,570. The allowance goes down by £1 for every £2 of income over £100,000. Wales uses the same bands as England and Northern Ireland for 2026/27.

England, Wales and Northern Ireland	Taxable income a year	Rate
Basic rate	Up to £37,700	20%
Higher rate	£37,701 to £125,140	40%
Additional rate	Over £125,140	45%

Scotland	Taxable income a year	Rate
Starter rate	Up to £3,967	19%
Basic rate	£3,968 to £16,956	20%
Intermediate rate	£16,957 to £31,092	21%
Higher rate	£31,093 to £62,430	42%
Advanced rate	£62,431 to £125,140	45%
Top rate	Over £125,140	48%

Sources: GOV.UK rates and thresholds for employers 2026 to 2027, GOV.UK Income Tax rates, The Pensions Regulator. Checked 27 October 2026.
National Insurance and other costs	Rate for 2026/27	How it applies
Employee Class 1 NI	8%, then 2%	8% on weekly earnings from £242 to £967, 2% above £967.
Employer Class 1 NI	15%	On weekly earnings above the secondary threshold of £96.
Apprenticeship Levy	0.5%	Of the annual pay bill, with a £15,000 allowance, so only pay bills over £3 million pay it.
Workplace pension	3% employer, 8% in total	Of qualifying earnings: weekly pay between £120 and £967.
Holiday pay	12.07%	Of pay, for irregular-hours and part-year workers. Treated as pay, so tax and NI apply.

Worked example: £20 an hour through an umbrella, 40 hours

The agency pays the umbrella £20.00 an hour for 40 hours, £800.00 for the week. The umbrella's margin is £20.00 a week, it passes on the levy, and the worker is in the pension at 5% and lives in England. These are example figures, not typical ones.

Default inputs of the calculator above, one week, 2026/27 rates.
Line	Umbrella	PAYE at £15.00
Paid by the agency	£800.00	Rate plus employer costs
Umbrella margin	£20.00	None
Employer NI	£86.61	£86.46, paid by the agency
Apprenticeship Levy	£3.37	None (agency under £3 million)
Employer pension	£16.60	£16.57, paid by the agency
Gross pay including holiday	£673.42	£672.42
Worker pension	£27.67	£27.62
Income tax	£80.80	£80.61
Employee NI	£34.51	£34.43
Take-home	£530.43	£529.75
Cost to the agency	£800.00	£775.46

The umbrella route leaves basic pay of £15.02 an hour plus holiday pay. The PAYE route at £15.00 costs the agency £775.46 a week. For the same £800.00 cost to the agency, with no umbrella margin, PAYE could pay £15.46 an hour and the worker would take home £543.90.

Holiday pay through an umbrella

Umbrella workers build up holiday like anyone else on irregular hours: 12.07% of the hours they work, for leave years starting on or after 1 April 2024. An umbrella either pays it rolled up with each week's pay, shown as a separate line on the payslip, or holds it back and pays it when the worker takes leave.

The calculator assumes rolled-up holiday pay, so weekly take-home includes it. If the umbrella holds it back, weekly pay is lower now and the difference is paid later, when the worker takes time off. Either way, 12.07% of pay is not extra money on top of the assignment rate: it comes out of the same pot.

What changed for umbrella companies on 6 April 2026

For money paid to workers on or after 6 April 2026, GOV.UK says that where an umbrella company employs the workers, "the agency or end client is responsible for making sure PAYE is operated correctly". The agency here is the one with the contract to supply the worker to the end client; if there is no agency, it is the end client. If the umbrella underpays PAYE, HMRC says it can recover the underpayment from them. This is often called joint and several liability.

The umbrella company still works out and pays PAYE, and must give the agency or end client the information needed to check it.
It applies to existing labour supply chains as well as new ones.
Agencies already have to give each work-seeker a Key Information Document before they agree terms. Where an umbrella pays the worker, it must show the umbrella's fees and deductions and an example of pay from gross to net (regulation 13A of the Conduct Regulations).

What to compare between umbrella companies. The margin and how often it is charged, whether the levy and employer pension are taken from the assignment rate, how holiday is paid, and whether the payslip matches the Key Information Document. Ask your accountant or HMRC guidance about anything that promises much higher take-home than this calculator shows.

What the calculator leaves out

Tax codes other than 1257L, other income, and student or postgraduate loan repayments.
Pay periods that change week to week. Tax is worked as if the week repeats all year, which is close to how PAYE treats a steady weekly wage.
Pension tax relief at source. The worker's pension is taken before tax (a net pay arrangement), which gives a similar result for basic-rate taxpayers.
Expenses, benefits, overtime premiums and Statutory Sick Pay.
Any advice on which route to choose. It shows the sums for both, nothing more.

Questions people ask

Why is take-home lower through an umbrella at a higher rate?

Because the assignment rate is not the worker's pay. The umbrella takes its margin and the employer's costs from it first: 15% employer NI above £96 a week, often the 0.5% levy, and the employer pension. What is left is gross pay, which then has income tax and employee NI taken off like any PAYE job.

Is an umbrella company worker taxed through PAYE?

Yes. The umbrella company is the employer, so it runs PAYE and takes off income tax and employee National Insurance in the usual way. From 6 April 2026, if it gets PAYE wrong, HMRC can recover the underpayment from the agency that supplies the worker to the client, or from the end client when there is no agency.

Who pays employer National Insurance for an umbrella worker?

Legally the umbrella company, as the employer. In practice it pays the 15% employer NI out of the assignment rate it receives from the agency, before working out the worker's gross pay. That is why the worker's pay through an umbrella is lower than the assignment rate, even before income tax and employee NI.

Does this umbrella calculator work for Scotland?

Yes. Choose Scotland and it uses the Scottish income tax bands for 2026/27: 19%, 20%, 21%, 42%, 45% and 48%. National Insurance, the Apprenticeship Levy and pension rules are the same across the UK, so only the income tax line changes. Wales uses the same bands as England for 2026/27.

What is a Key Information Document?

It is a document of no more than two A4 sides that an employment business must give a work-seeker before they agree terms. Where an umbrella company pays the worker, it must show the umbrella's fees and deductions and an example of pay from gross to net, so the worker can check the take-home figure.

Sources

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