If you’re hunting for a legit umbrella company in the UK, the first thing you want to figure out is this — are they actually compliant? Anyone can set up a fancy-looking website and promise you high take-home pay. But that doesn’t mean they’re following the rules. If they’re not, you could be the one left in hot water with HMRC later.
This guide gives you a plain-English checklist on how to spot a compliant umbrella company so you don’t get caught in a tax trap.
Do they follow UK employment and tax law?
A compliant umbrella company follows PAYE rules, pays the right National Insurance, offers legal benefits like pension and holiday pay, and gives you a proper employment contract.
They’re not just running your payroll — they’re your official employer on paper. That means they have to treat you like any employee under UK law. If they don’t, they’re not compliant.
Let’s start with PAYE. Every compliant umbrella must run your pay through PAYE. That means they take off Income Tax and employee National Insurance before your money hits the bank. They also have to pay employer National Insurance and the apprenticeship levy. These come off your assignment rate before your gross salary is worked out.
If they’re giving you close to 80–90% of your contract rate after deductions, something’s off. Either they’re skipping tax, using dodgy offshore schemes, or disguising earnings as expenses. HMRC doesn’t look the other way anymore — they claw it back from you.
Now look at your contract. You should get a written employment contract. It must include things like sick pay, maternity leave, and pension auto-enrolment. Compliant umbrellas follow these rules, even if you’re on short-term gigs.
Then comes holiday pay. They either roll it into your weekly rate or hold it for you to request later. Either way, they have to make it clear. If your umbrella doesn’t mention holiday pay or tries to say you’re not entitled — walk away.
One more thing: are they reporting everything correctly to HMRC? Real umbrellas file regular RTI submissions, keep your tax code updated, and report pension contributions to the right scheme. If you hear phrases like “loan scheme,” “bonus payment,” or “we use a trust,” get out now. That’s not compliant. That’s a trap.
Are they independently audited or accredited?
A compliant umbrella company should hold a certification from a known auditor like FCSA or SafeRec. These groups regularly check if payroll, contracts, and tax processes follow the rules.
Anyone can say they’re compliant. But if no one’s checking them, how do you know?
The FCSA (Freelancer and Contractor Services Association) audits umbrella companies for compliance. They check tax systems, contracts, pension auto-enrolment, payslips, holiday pay, and how workers are treated. If a company’s a member, you’ll usually see the logo on their site. But don’t stop there — cross-check on the FCSA website. Some umbrellas fake badges.
Another one to look for is SafeRec. They run compliance tech that audits payslips in real time. Agencies and end clients like it because they can prove their contractors aren’t being underpaid or misled.
Being audited doesn’t mean the company’s perfect. But it does mean someone else is watching their books. That’s better than trusting an umbrella that’s never been checked and won’t explain where your money goes.
If they say, “We’re not FCSA, but we follow the same rules,” ask why they haven’t applied. Compliance isn’t a vibe — it’s either proven or it isn’t.
Do they give you a proper payslip and KID?
You must get a payslip that shows how your assignment rate breaks down into margin, employer deductions, gross salary, and net pay. And you must receive a Key Information Document before your first shift.
Every umbrella company must give you a Key Information Document (KID) before you accept a contract. It’s a legal requirement. The KID explains what you’ll be paid, how deductions work, what the umbrella margin is, and how your take-home is calculated.
If they don’t give you one — that’s non-compliant. If they give you a vague one with no breakdown — same deal. The point of a KID is to stop surprises when your first payslip lands. Get an instant KID sample generated with our free umbrella take home pay calculator.
Next comes your payslip. It should include:
- Your full assignment rate
- The umbrella margin
- Employer’s National Insurance
- Apprenticeship levy
- Your gross salary
- Your income tax
- Your employee NI
- Any pension or student loan deductions
- Your final take-home pay
The margin should be a fixed weekly amount — like £15 or £20 — and it should be listed clearly. If it’s buried or disguised as “processing fee” or “admin deduction,” that’s not transparent.
Also check your tax code. If it’s 1257L and you’re a basic-rate taxpayer, you should see around 20% income tax. If your umbrella says you’re not paying tax yet, or it looks like they’re skipping NI — ask questions. That’s not how PAYE works.
Compliant umbrellas want you to see what’s going on. Non-compliant ones want to confuse you with vague lines like “earnings credit” or “rebate allowance.” If it’s not crystal clear, it’s probably shady.
Are they transparent and trustworthy?
A compliant umbrella company has directors listed on Companies House, no offshore connections, years of clean trading history, and doesn’t promise unrealistically high take-home pay.
Look them up. Go to companieshouse.gov.uk and type in their name. See when they were formed. Check if their directors have been banned before or jumped between companies. See if they’ve been dissolved and reopened under a new name — that’s a red flag.
Check their registered office. Is it a real place or a mailbox service? Legit umbrellas don’t hide. They have physical offices, staff you can speak to, and a clear complaints process.
Now look at their reviews. Type their name into Google or Trustpilot. You’ll spot patterns fast. If people say their pay keeps changing, or they don’t get holiday pay, or they’re being charged without warning — believe them. If they have hundreds of 5-star reviews in the same writing style, all posted in one week — that’s fishy.
Most importantly, stay away from umbrellas that promise 80–90% take-home pay. That’s not legal. No umbrella can give you that after following PAYE rules. If someone claims they do it with “loans,” “bonuses,” “overseas payments,” or “rebates” — they’re playing games with HMRC.
Those games might work for a while. Then one day, HMRC sends you a letter asking for tens of thousands in unpaid tax. The umbrella company’s gone. The director vanished. You’re stuck.
Compliant umbrellas never try to look too good. They show you what you earn. What you lose. What you keep. No smoke and mirrors. Just maths.
Final tips to spot a compliant umbrella
To find a compliant umbrella, avoid high take-home schemes, ask for a breakdown before you start, check their audits, and look them up on Companies House.
There’s no one perfect umbrella. But there are a lot of good ones that follow the rules. Here’s what to do before you say yes to any umbrella company:
- Ask if they’re FCSA or SafeRec accredited
- Request the Key Information Document before your first day
- Ask for a full example payslip with your rate
- Google their name plus “HMRC,” “scam,” or “loan scheme”
- Look them up on Companies House and check their age
- See what agencies and other contractors say about them
- Check if they’ve published anything about the 2026 regulatory changes — that shows they’re keeping up
And if something feels wrong, don’t ignore it. A compliant umbrella answers your questions. A dodgy one dodges your questions.
You’re the one who gets paid. You’re the one who gets taxed. So you need to know who’s handling your money and what they’re doing with it.
When you choose a compliant umbrella company, you protect yourself from surprise bills, messy audits, and the kind of tax trouble that ruins your year. Stick to the rules. Ask the hard questions. And never let your payslip confuse you more than your contract.
