How Invoicing Works Through an Umbrella Company

•3 min read
umbrella companyagency workerPAYE contractorumbrella invoice

A guide for agency workers and contractors using an umbrella company for payroll and invoicing.

What's an Umbrella Company?

An umbrella company is a payroll service used by agency workers. You're technically employed by them, they bill the agency for your work, and they pay you PAYE wages.

How Invoicing Works

  1. You submit timesheets to the umbrella company (showing hours worked)
  2. They generate an invoice to the agency for your services
  3. The agency pays the umbrella company
  4. The umbrella company pays you PAYE wages (minus tax, NI, umbrella fees)

What You Don't Do

When using an umbrella:

  • ❌ Don't invoice the agency directly
  • ❌ Don't register as self-employed
  • ❌ Don't file a Self Assessment tax return
  • ❌ Don't keep invoices (umbrella keeps them)

What You Get

  • PAYE wages (tax deducted at source)
  • P60 at year end
  • National Insurance contributions paid
  • Holiday pay included (typically)

Costs

Umbrella companies charge a fee (typically £20–£50/week or 5–7% of gross pay).

FAQ

Is an umbrella company better than being self-employed?

Depends on your situation. Umbrella = simpler admin but less tax control. Self-employed = more complex but potential tax savings.

Do I need professional insurance?

Usually included in umbrella fee, but check.

Create an HMRC-Compliant Invoice in Seconds

No sign-up required. Generate a professional, UK-formatted PDF invoice instantly for free.

Create Free Invoice Now