Guide
Umbrella take-home pay: where your day rate goes, line by line
Updated
The umbrella payslip shock is almost always the employer costs: on £500 a day, £14,133 of employer NI comes out of your rate before income tax is even calculated.
The deduction waterfall
Umbrella companies employ you and bill the client. Because the assignment rate is the employer's budget, all employment costs are funded from it, legally and by design, not sharp practice, provided they are itemised (gov.uk: working through an umbrella company).
| Line | Amount |
|---|---|
| Assignment income (invoiced) | £115,000 |
| Umbrella margin (£25 × 46 weeks) | −£1,150 |
| Employer NI (15% above £5,000) | −£14,133 |
| Apprenticeship levy (0.5%) | −£496 |
| Your gross pay | £99,221 |
| Income tax (PAYE) | −£27,120 |
| Employee NI (8% / 2%) | −£3,995 |
| Take-home | £68,105 |
That is 59.2% of the invoice value. Note the gross pay of £99,221 sits just under £100,000, every pound of rate above roughly £505/day starts eroding the personal allowance, which is why take-home flattens sharply from there.
Holiday pay: rolled up, not extra
Umbrellas must provide statutory holiday pay. Most "roll it up", include it in each payslip as an itemised slice of the same gross. It is not additional money on top of your rate. Check the payslip: rolled-up holiday pay that is retained until you claim it, or never itemised, is the classic umbrella red flag.
What a compliant umbrella cannot do
- Promise a higher percentage take-home than PAYE allows, "80% retention" schemes are disguised remuneration, and HMRC pursues the contractor.
- Charge you employer NI on top of the agreed assignment rate without itemising it, the Key Information Document from the agency should show the rate both ways.
- Deduct general expenses from taxable pay, since 2016, home-to-work travel and subsistence relief is blocked for workers under supervision, direction or control.
Pension is the one big lever inside IR35: salary-sacrifice employer contributions through the umbrella escape income tax, employee NI and the 15% employer NI entirely.