Agency wants me to be paid under an umbrella arrangement

Make sure the umbrella is processing tax and NI on your full wage and not only a small proportion of it, then paying you the balance as a tax free loan, annuity or dividend, or some other tax mitigation scheme.
you may be told you can receive up to 85-90% of your gross wage by using their scheme/product, but invariably HMRC will catch up to it and YOU will be sent a bill for unpaid tax, and very possibly subject to a full investigation into your tax affairs.


Many of our contractors have used these schemes in the past with other agencies and are now receiving these letters from HMRC.


Some umbrellas are straight PAYE with no bells and whistles and you will receive the same wage as if you were paid directly by the agency.


Best thing is to google the name of the umbrella co and see if other contractors have posted anything on other forums complaining about pay issues or tax issues.


as far as I know, the agency cant force you to use a particular umbrella if you don't want to, you just need to provide them with an alternative umbrella that you do wish to use

stator wrote: »

If you have a choice, I'd opt for PAYE every time.
I don't see the point in complicating the set up when you working for a single company full time.

But if you don't have a choice, then a contractor job is better than nothing.
Find your own umbrella company based on recommendations not by the agency

Contractor rates are usually many multiples of a PAYE job. Thats why we do it. For many of us its a lifestyle choice.

I was paid by an umbrella company, Giant, when I got a job through an agency. I had the choice of PAYE, umbrella, or limited. I chose the umbrella route because they paid holiday money directly each week, rather than putting it aside to be paid it when I actually took time off.

This was appealing as it meant I was taking home around £60 more a week than if I was PAYE, and at the time I was desperate for cash.

However, there were a number of issues. The main one was that for reasons I was never able to establish, the umbrella paid me on a different day each week. It should have been a Friday, and it often was, but then I would get paid again on say, the following Tuesday, and then that would sometimes mean having to wait around a week and a half for my next timesheet to be processed. I asked them repeatedly to pay me on a set date each week, but they always some odd reason why this wasn't possible.

It also messed up tax and NI because if you receive two weeks worth of wages in a 7 day period, it looks like you are earning more than you actually are.

Basically, I found it impossible to budget, as I never knew when, or how much I would be paid, which was doubly annoying since I worked set hours so should received exactly the same amount each week.

There was another issue regarding auto-enrollment of pension, though I forget the details now but I do know it was never resolved and resigned myself to losing those contributions.

Anyway, after around 6 months, I lost patience with the umbrella company as well as deciding that I wanted to get paid for my days off, so I left to go PAYE directly with my agency.

More than a year after leaving Giant, I got home one evening to an official looking brown envelope which turned out to be from HMRC, informing me that for the previous financial year (which covered the period I was with the umbrella) I'd underpaid tax to the tune of £356.

This has never happened to me in the many years I've been paid directly by an agency, so it's almost certain that it was down to some sharp practice by the umbrella company.

So, my view now is to only use an umbrella if PAYE is not an option.