An umbrella company costs more than a weekly margin. You need to know what each deduction is and why it appears. This guide covers the costs on a typical umbrella payslip in 2026-27.
New to umbrella companies? Start with how umbrella companies work.
What does an umbrella company cost?
An umbrella company charges a weekly or monthly margin, usually £15 to £25 per week in 2026-27. That is the umbrella’s fee for running your payroll. It is not the only deduction from your contract rate. Employer National Insurance, the Apprenticeship Levy, income tax, and employee NIC also reduce your take-home pay.
The margin is the umbrella’s direct profit. Everything else goes to HMRC or covers a legal cost. That difference matters. It stops you blaming the umbrella for deductions it does not control.
Your contract rate is not your gross pay. The umbrella receives your rate and takes off statutory employer costs first. What is left becomes your gross pay.
What is the umbrella margin?
The umbrella margin is the weekly fee your provider charges to employ you. Most providers charge between £15 and £25 per week in 2026-27.
Some providers show this as a monthly figure. A £20 weekly margin works out at about £87 a month. Ask for the weekly rate so you can compare providers fairly.
The margin covers payroll processing, employer admin, workplace pension enrolment, and holiday pay processing. It does not cover employer NIC or the Apprenticeship Levy. Those come out before you receive gross pay.
What else gets deducted before you’re paid?
Several statutory costs are taken out before the umbrella calculates your gross pay.
Employer NIC sits at 15% on earnings above the Secondary Threshold (£9,100/year). The umbrella pays this directly to HMRC. It is a cost of employing you, not profit for the umbrella.
The Apprenticeship Levy is 0.5% on payroll above £3 million per year. Most umbrella companies absorb this within their margin rather than passing it on separately.
Holiday pay is either held in a pot for when you take leave, or rolled up and paid with each payslip. Check which method your umbrella uses before you sign.
After those employer-side costs, you receive your gross pay. From gross pay, HMRC deducts employee NIC and income tax through PAYE.
How does employer NIC affect your costs?
Employer NIC at 15% is one of the biggest costs in umbrella contracting. It rose in April 2025. It reduces the amount available for your gross pay before any other deduction. It is a statutory tax your umbrella pays directly to HMRC.
On a £350/day contract, you earn roughly £7,000 in contract income over four weeks. Employer NIC cuts that pot by more than £800 before your gross pay is set.
This is where most payslip confusion starts. Your contract rate goes in at the top. Employer NIC comes out next. What is left becomes your gross pay. Your umbrella’s margin sits separately.
If an umbrella quotes take-home pay without mentioning employer NIC, ask for the full calculation. Legitimate providers show every line.
A worked example at 2026-27 rates
This example uses £350/day, 5 days a week, 20 working days. That comes to £7,000 in contract income.
| Item | Amount |
|---|---|
| Contract income (20 days x £350) | £7,000.00 |
| Umbrella margin (£20/week x 4 weeks) | -£80.00 |
| Employer NIC (15% above threshold) | -£769.50 |
| Apprenticeship Levy (absorbed in margin) | £0.00 |
| Gross pay | £6,150.50 |
| Employee NIC (8% on £12,570-£50,270 band) | -£338.20 |
| Income tax (20% basic rate above £12,570 PA) | -£928.46 |
| Estimated net take-home | ~£4,883.84 |
These figures are estimates. Your actual net pay depends on your tax code, pension contributions, and exact working days. Use the umbrella pay calculator to run your own numbers.
Employee NIC in 2026-27: 8% on earnings between £12,570 and £50,270. It drops to 2% above £50,270.
Income tax personal allowance is £12,570. Basic rate is 20% up to £50,270. Higher rate is 40% above that.
What’s a fair margin to pay?
A fair umbrella margin sits between £15 and £25 per week. Some providers charge less. A few charge more. Be wary of very low margins. Running a compliant payroll has real costs. If a provider is below £15 a week, something else is getting cut.
Be just as wary of opaque pricing. If a provider will not state its margin clearly upfront, that is a red flag.
DASA Umbrella holds accreditation from FCSA, Professional Passport and SafeRec. All three require transparent fee disclosure as part of their compliance standards. You know exactly what you pay before you sign. Learn more about umbrella company services at DASA Umbrella.
How do you compare umbrella company costs?
Compare providers on margin size, transparency, and compliance status. Don’t judge them on headline take-home figures alone.
Some providers quote inflated take-home figures using non-compliant schemes that HMRC does not recognise. If a take-home figure looks too good, it usually is.
Ask every provider these four questions before you sign:
- What is your weekly margin, stated in pounds?
- Do you show employer NIC separately on my payslip?
- Are you FCSA or Professional Passport accredited?
- How do you handle holiday pay?
Compliance accreditation matters. FCSA and Professional Passport audit their members against HMRC standards. DASA holds all three. That means three independent bodies check the payroll process.
Read how to check umbrella compliance. It covers exactly what to look for.
FAQs
How much does an umbrella company cost?
Most umbrella companies charge a weekly margin of £15 to £25 in 2026-27. That fee covers payroll admin. Employer NIC (15%), income tax, and employee NIC are separate statutory deductions handled through PAYE.
What is the umbrella company margin?
The margin is the weekly fee your umbrella charges to employ you and process your pay. It usually sits between £15 and £25 a week and covers payroll processing, pension enrolment, and admin.
Does employer NIC come out of my contract rate?
Yes. Employer NIC at 15% is taken from your contract rate before your gross pay is worked out. Your umbrella pays it directly to HMRC. It’s a statutory cost, not a profit line for the provider.
What is a fair umbrella margin?
A fair margin is usually £15 to £25 a week. Be wary of margins below £15, because compliant payroll has real running costs. Always check that your provider holds FCSA or Professional Passport accreditation.
How do I compare umbrella company costs?
Ask each provider for their weekly margin in pounds, check whether employer NIC appears separately on payslips, and confirm their accreditation before you sign.
