Umbrella vs agency PAYE
With holiday pay on top of the PAYE rate, £500 a day through an umbrella matches only £380.41 a day on agency PAYE, a 31.4% uplift. The 15% to 20% uplift often quoted falls well short of the employer costs the umbrella has to cover.
Rates for the 2026/27 tax year. Checked 7 November 2026.
The umbrella rate is 31.4% higher than the PAYE rate, £119.59 a day. That is more than the 15% to 20% agencies often quote, which on £380.41 would be £437.47 to £456.49.
| Umbrella | Agency PAYE | |
|---|---|---|
| Day rate | £500.00 | £380.41 |
| Rate times days | £110,000.00 | £83,690.20 |
| Umbrella margin | − £1,100.00 | — |
| Employer NI | − £13,318.71 | — |
| Apprenticeship levy | − £468.96 | — |
| Employer pension | − £1,320.90 | — |
| Holiday pay on top | — | + £10,101.41 |
| Gross pay | £93,791.43 | £93,791.61 |
| Your pension | − £2,201.50 | − £2,201.50 |
| Income tax (1257L) | − £24,067.97 | − £24,068.04 |
| Employee NI | − £3,886.43 | − £3,886.43 |
| Take-home | £63,635.53 | £63,635.64 |
| A month | £5,303 | £5,303 |
| Employer NI | £13,318.71 |
|---|---|
| Apprenticeship levy | £468.96 |
| Employer pension | £1,320.90 |
| Umbrella margin | £1,100.00 |
| Holiday pay at 12.07% | £10,101.39 |
| Total | £26,309.96 |
An agency PAYE rate usually excludes holiday pay, which accrues on top at 12.07%. An umbrella rate has to cover it from inside the rate. On PAYE the agency pays employer NI, the levy and employer pension on top of your rate. Take-homes can differ by under £1 because rates are matched to the penny. Scottish income tax is not supported yet.
Worked example: £500 a day through an umbrella
An umbrella assignment rate of £500 a day, five days a week for 44 weeks, bills £110,000. The £25 a week margin takes £1,100. Out of the remaining £108,900 the umbrella pays employer NI of £13,318.71, employer pension of £1,320.90 and the apprenticeship levy of £468.96, leaving gross pay of £93,791.43. That gross includes rolled-up holiday pay of £10,101.39, so basic pay is £83,690.04.
On agency PAYE with holiday pay on top, the same basic pay over 220 days is £380.41 a day. Holiday pay at 12.07% brings gross pay to £93,791.61, and the agency pays its employer NI, levy and pension on top of that. You take home £63,635.53 a year through the umbrella and £63,635.64 on PAYE.
So the umbrella rate needs to be 31.4% higher than the PAYE rate, £119.59 a day or £26,309.80 a year. That gap pays for the employer NI, levy, pension, margin and holiday pay listed above. A 15% to 20% uplift on £380.41 would be £437.47 to £456.49, well short of £500.
Why the result moves
How holiday pay is paid moves it most. If the PAYE rate already includes holiday pay, £500 a day through the umbrella matches £426.32 on PAYE, an uplift of 17.3%. With it on top, the uplift is 31.4%.
Your day rate matters less, because employer NI is a flat 15% above £5,000 and the pension is capped at £50,270 of earnings. At £300 a day the uplift is 32.8% and at £650 it is 31%. A smaller margin helps a little: £15 a week instead of £25 takes the uplift to 30.9%. Opting out of the pension takes it to 29.9%.
When this calculator is wrong for you
- Your umbrella or agency pays into a pension by salary sacrifice.
- Your tax code is not 1257L, or you repay a student loan.
- The agency pays PAYE holiday pay in a way that is neither on top nor rolled up.
- You work part of the year, so annual thresholds do not match your payslips.
- You live in Scotland.
Questions people ask
What does the uplift on an umbrella rate cover?
Everything the agency would pay on top of a PAYE rate but the umbrella has to take out of yours: employer NI at 15% above £5,000, the 0.5% apprenticeship levy, employer pension, the umbrella margin and, when the PAYE rate has holiday pay on top, that holiday pay. At £500 a day those come to £26,309.96 a year.
Why is a 15% to 20% uplift often not enough?
Employer NI rose from 13.8% to 15% in April 2025 and the threshold fell from £9,100 to £5,000, so more of the rate goes on NI. With holiday pay on top of the PAYE rate, £500 a day through an umbrella only matches £380.41 a day on PAYE, a 31.4% uplift. A 15% to 20% uplift on £380.41 would be £437.47 to £456.49.
What is the difference between holiday pay on top and rolled up?
Most agency PAYE rates are basic pay, and holiday pay of 12.07% accrues on top for the weeks you take off. An umbrella rate includes holiday pay inside it. If your PAYE rate already includes holiday pay, choose rolled up: at £500 a day the matching PAYE rate becomes £426.32 and the uplift falls to 17.3%.
Is agency PAYE better than an umbrella?
At matched rates the gross pay is the same, so income tax, NI and take-home are the same to within pennies. The difference is who carries the employer costs. On PAYE the agency pays them on top and there is no margin, so an umbrella offer only matches it if the rate is uplifted by the amount shown here.
Who pays the apprenticeship levy?
Employers with a pay bill over £3 million pay 0.5% of it. Umbrella companies are your employer and usually take it out of the assignment rate before your gross pay. On agency PAYE the agency is the employer, so if it pays the levy it comes out of its own margin, not your rate.
Can I choose between umbrella and agency PAYE?
Sometimes. Many agencies offer both for inside IR35 roles, and some only offer one. If you are offered both, compare the umbrella rate with the PAYE rate this calculator gives, and ask whether the PAYE rate has holiday pay on top.
Does the pension change the answer?
A little. With auto-enrolment at 3% employer and 5% employee, £500 a day matches £380.41 on PAYE. With no pension the umbrella keeps the 3% employer contribution as pay, so the matching PAYE rate rises to £385.05 and the uplift falls to 29.9%.
How this is worked out
The two rates are treated as equal when they produce the same gross pay. Umbrella: the rate times days worked, less the margin, is what the umbrella has to employ you; employer NI at 15% above £5,000, employer pension on qualifying earnings and the 0.5% apprenticeship levy are solved out of it to leave gross pay, and gross pay divided by 1.1207 is basic pay. Agency PAYE: the rate times days is basic pay, with holiday pay at 12.07% added on top, or treated as already inside the rate if you choose rolled up. From an umbrella rate, the PAYE rate is basic pay (or the whole gross when rolled up) divided by days worked. From a PAYE rate, the umbrella rate is found by halving a range from £0 to £10,000 a day 60 times and keeping the penny rate that matches closest. Income tax on code 1257L and employee NI then apply to gross pay on both routes, with your pension taken before income tax. The uplift is the umbrella rate divided by the PAYE rate, less one.
Full formulas, rounding rules and test cases are on the methodology page. Every rate update is listed in the changelog.