Umbrella Company Costs Explained (2026-27)
Using an umbrella company costs more than just a weekly margin. You need to understand what each deduction is and why it exists. This guide covers every cost on a typical umbrella payslip in 2026-27.
New to umbrella companies? Start with our guide to understanding umbrella companies.
What does an umbrella company cost?
An umbrella company charges a weekly or monthly margin, typically £15 to £25 per week in 2026-27. That's the umbrella's fee for running your payroll. It's not the only deduction from your contract rate. Employer National Insurance, the Apprenticeship Levy, income tax, and employee NIC all reduce your take-home pay too.
The margin is the umbrella's only direct profit. Everything else flows to HMRC or meets a statutory obligation. Knowing the difference matters. It stops you blaming your umbrella for deductions they don't control.
Your contract rate is not your gross pay. The umbrella receives your rate and deducts statutory employer costs first. What remains 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/week margin is roughly £87/month. Always 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 come out before the umbrella sets 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's a cost of employing you, not a profit line 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 retained in a pot for when you take leave, or rolled up and paid with each payslip. Know 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 from April 2025. It reduces the amount available for your gross pay before any other deduction. It's a statutory tax that 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 over £800 before your gross pay is set.
This causes the most confusion on contractor payslips. Your contract rate goes in at the top. Employer NIC comes out next. What's left becomes your gross pay. Your umbrella's margin is separate.
If an umbrella quotes take-home 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's £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 DASA 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 cautious of very low margins. Running a compliant payroll has real costs. A provider below £15/week cuts corners somewhere.
Be equally cautious of opaque pricing. If a provider won't state their margin clearly upfront, that's a red flag.
DASA Umbrella holds dual accreditation from FCSA and Professional Passport. Both bodies require transparent fee disclosure as part of their compliance standards. You know exactly what you pay before you sign. Find out more at DASA Umbrella.
How do you compare umbrella company costs?
Compare providers on margin size, transparency, and compliance status. Don't compare 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 almost always 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 both accreditations. That means two independent bodies have checked the payroll process.
Read the guide to what makes an umbrella company compliant in the UK. It covers exactly what to look for.
