Umbrella Company

An umbrella company is a special type of Limited Company that exists for the sole purpose of employing “self-employed contractors” so that they can carry out short term assignments without the hassle of sorting out their own taxes or invoicing for their work.

While they might act as a self-employed individuals, in the eyes of HMRC contractors become employed by the umbrella company. The umbrella acts just like a normal employer and processes employee payroll through PAYE and NI, paying any amounts due on their behalf and issuing a payslip.

This means that the contractor passes on the responsibility for calculating & paying their taxes to the umbrella for the duration of the contract, often meaning no self assessment is needed at the end of the year.