If you work through an umbrella company, the rules changed on 6 April 2026. Responsibility for operating PAYE on your pay moved up the chain to the agency or end client that supplies you, rather than sitting with the umbrella. Your payslip should now reconcile cleanly: one employer, PAYE deducted at source, and no unexplained elements. Anything that does not reconcile is worth challenging immediately.
Why the Change Happened
Non-compliant umbrella arrangements had been costing workers money and exposing them to tax liabilities they did not know existed. Schemes would pay part of the money as salary and characterise the rest as something non-taxable, leaving the worker with an unexpectedly good net figure and a future problem.
Shifting PAYE responsibility to the agency or end client gives someone with money and a reputation a direct reason to care whether deductions are correct. For you, the practical effect is that your payslip should be simpler and that there is now a clearly identifiable party to complain to.
How to Read Your Payslip Line by Line
Start with the two figures that matter and work outwards. The assignment rate is what the agency pays for your work. Your gross pay is what reaches you before deductions. The gap between them is where problems hide.
What Should Be There
- Your gross taxable pay for the period
- Income tax deducted under PAYE, with your tax code shown
- Employee National Insurance
- Pension contributions, if you are enrolled
- Holiday pay, either paid as it accrues or rolled up and clearly labelled
- Year-to-date totals
What Should Not Be There
- Employer National Insurance deducted from your pay rather than paid on top
- An apprenticeship levy charge passed to you
- Unexplained margin or administration fees taken after tax
- Loans, advances, annuities or grants described as part of your reward
- Expenses you did not claim and cannot evidence
Employer National Insurance is the most common issue. It is a cost of employing you, not a deduction from your earnings. Where an assignment rate has been quoted inclusive of employment costs, that should be explained before you sign, not discovered on a payslip.
The Holiday Pay Question
Holiday pay is money you are entitled to, not a bonus. Where it is rolled up into your hourly rate it must be identified separately on the payslip so you can see what portion of your pay it represents. Rolled-up holiday pay that is invisible is a longstanding source of underpayment, because workers then take unpaid leave believing they have already been paid for it.
Check whether you are accruing and drawing holiday, or being paid it as you go. If you cannot tell from the payslip, ask in writing and keep the answer.
Net Pay That Looks Too Good
A net figure noticeably higher than colleagues on the same assignment rate is a warning rather than a win. The usual mechanism is that part of your pay has been characterised as something other than earnings, which means the tax on it has not been paid. Liability for unpaid tax can follow the worker.
If you are offered a take-home percentage as a selling point, particularly anything around or above 85 per cent of the assignment rate for a standard role, treat it as a scheme rather than an efficiency and get independent advice.
What to Do If Something Is Wrong
- Ask the umbrella for a written breakdown reconciling assignment rate to gross to net
- Ask the agency directly, since PAYE responsibility now sits with them or the end client
- Keep every payslip and every reply, dated
- Check your personal tax account to see what has actually been reported to HMRC against your record
- Report suspected non-compliance to HMRC if the explanation does not add up
Your personal tax account is the most useful of these, because it shows what an employer has told HMRC you earned and paid. A mismatch between your payslips and that record is concrete evidence rather than a suspicion.
Umbrella, Agency PAYE or Your Own Company
Umbrella is one of three ways temporary work gets paid, and the differences affect your net pay, your rights and your admin burden. Knowing which you are in stops you comparing incomparable rates.
The Three Arrangements
- Agency PAYE, where the agency employs you directly and operates PAYE. Simplest, usually lowest admin, no margin deducted
- Umbrella, where an intermediary employs you across multiple assignments. Continuity of employment across placements, with a margin
- Your own limited company, where you contract through a company you control. More control and more responsibility, with IR35 status determined by the client for medium and large engagements
Where an agency offers you a choice, compare like with like by asking for an illustration of net pay on the same assignment rate under each option. A higher headline rate through an umbrella can produce lower take-home once the margin and employment costs are accounted for.
Be wary of being told an umbrella is compulsory when agency PAYE exists. It may genuinely be the agency's only process, and it is worth asking rather than assuming.
Frequently Asked Questions
Who Is Legally Responsible for My PAYE Now?
From 6 April 2026 responsibility for accounting for PAYE on umbrella workers sits with the agency that supplies you, or with the end client where there is no agency, rather than with the umbrella company itself.
Can Employer National Insurance Be Taken From My Pay?
No. It is an employer cost. Where an assignment rate was quoted as inclusive of employment costs, that arrangement should have been explained in writing before you accepted the assignment.
Should I Be Enrolled in a Pension?
Yes, if you meet the earnings and age criteria. Umbrella workers are employees of the umbrella for these purposes and automatic enrolment applies, although you can opt out after being enrolled.
What If My Umbrella Company Closes Owing Me Money?
Raise it with the agency or end client immediately, since responsibility for PAYE now sits with them. Keep your payslips, contract and any correspondence, and check your personal tax account for what was reported.
Do I Still Need to File a Tax Return?
Not usually, if PAYE is operated correctly and you have no other reportable income. If you have been in a scheme or have multiple income sources, a return may be required and is often the point at which problems surface.
A Five-Minute Monthly Check
Compare the assignment rate on your contract to the gross on your payslip, confirm that employer costs have not been deducted from your side, check holiday pay is identified, and once a quarter compare the year-to-date figures against your personal tax account. Four checks, five minutes, and it catches almost everything that goes wrong.
This article is general information and not tax advice. If your arrangement looks unusual, take advice from a qualified accountant or contact HMRC directly before the next payment run.
Sources
UK Government. Implementing the Plan to Make Work Pay and Employment Rights Act.
https://www.gov.uk/government/publications/implementing-the-plan-to-make-work-pay-and-employment-rights-act
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