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4 Myths about Umbrella Companies

4 Myths About Umbrella Companies


With most agencies promoting umbrella companes as the best way to be paid when teaching in the UK, here are some myths busted about them that will make you think twice. 

Remember you always have the option on how you want to be paid - PAYE or umbrella. At Protocol we promote PAYE as the best option to be paid and offer this as the default payment option for all of our teachers.


Myth 1) You’ll earn more money through an umbrella company

This is nearly always false. Whilst you might pay marginally less tax through an umbrella company (as opposed to PAYE), you have to pay a fee to the umbrella company (anywhere from £10-£20) as well as your agency’s employer National Insurance Contribution. This can be anywhere from £65-£80 per week. You don’t have to pay these extra fees & charges through PAYE.

A teacher on £130 through PAYE takes home just over £500 per week after tax when working 5 days a week. The same teacher on £130 with an umbrella company takes home about £440. Even if they were to be paid £140 a day, they’d still take home only £470 per week after tax and fees!

Having a higher daily rate doesn’t mean you’ll earn more money.


Myth 2) You can claim a load of tax deductions

True, you can claim your flight to the UK as a tax deduction (but only if you register with an umbrella company before you book it), however it equals out to be about £2.50 a week over 2 years that you’ll get back. When you’re £60 worse off each week with an umbrella company just to claim a £2.50 weekly tax bonus, it just doesn’t add up. 

As of April 2016 you can no longer claim any other travel or ‘subsistence’ deductions, therefore it is not financially viable to be paid through an umbrella company to reduce tax


Myth 3) If you work through more than one agency you’ll get taxed much more without an umbrella company

As long as you’re on the right tax code (a quick phone call to HMRC will fix that) you’ll never pay more tax no matter how many agencies you work through.  Some teachers do get taxed more through their second agency however this is when they don’t notify HMRC that they have a second employer.

As long as the tax office knows you’re working with multiple agencies you’ll never pay more tax.


Myth 4) It’s easier to work through an umbrella company as they deal with my end of year tax

True, an umbrella company streamlines the tax refund process for you, but at what cost? If you work 40 weeks in the school year and you’re consistently £40 a week worse off, then you’re effectively paying £1600 (that’s about $3000AUD) for somebody to do your tax return that you can do yourself for free. Pretty sure not even James Packer pays his accountant that much for his tax return.

Tax refunds can be submitted very easily by individual teachers each year at tax time – you do not need an accountant to do it for you (and definitely not for £1600!)



Don’t buy into the spin other agencies promote about umbrella companies; they are there to save them money, not to make more for you. Protocol Education pays teachers fairly – and weekly - through PAYE so your take home pay is maximised (and you don’t pay any additional fees or charges simply to receive your pay.)

Tags: umbrella companies, PAYE, teaching in London, casual teaching in England

Category: Australian Teachers

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