Umbrella Company vs PAYE: Which Should You Choose?

Umbrella Company or PAYE?

As a supply teacher, you may find yourself employed by a number of different schools or agencies throughout the tax year – particularly if you’re opting for short term/day-to-day supply teaching jobs.

This can often make it difficult for the Inland Revenue to decide just how much PAYE tax should be deducted from your wages. There may also be times when you are placed on a high rate emergency tax, the overpayments, which can be claimed back at a later date.

At World Class Teachers, we endeavour to help our teachers gain the most out of the supply roles they enter through our agency service.

What is PAYE?

    • Pay as You Earn (PAYE) is the UK’s system of paying income tax and National Insurance contributions.
    • This is usually handled by your agency who will deduct the relevant figures from your wages each time before paying you and send this contribution on to HM Revenue & Customs.

What is an Umbrella company?

umbrella company

Flickr Creative Commons / Pierre Mallien

Umbrella company vs PAYE – how to choose?

    • Not a company that sells brollies, an Umbrella company is an intermediary that acts as your employer to process your pay, rather than the agency you work through.
    • Working through an Umbrella company (as opposed to PAYE) allows Umbrella workers, under some circumstances, to offset the cost of their travel and subsistence expenses both in getting to work and whilst at a school.
    • Claiming expenses pre-tax reduces an Umbrella worker’s taxable gross salary and subsequently the amount of tax paid. On the whole, there is usually a 5 -10% difference in the rate of take home pay when using an Umbrella company rather than straight PAYE.
    • It is worth noting that Umbrella companies do charge fees for this service; however, your daily rate is still likely to be higher than if you opt for PAYE.

Particularly at WCT, any savings we make on payroll through using an Umbrella company will always be passed onto our teachers.

Umbrella company vs PAYE – how to choose?

      • Different methods of pay will best suit different people. You need to consider what is best given your living situation, commute, amount of work completed, and other such circumstances.
      • Different Umbrella companies offer different deals, so it is worth doing some comparison work to make sure you choose the one that would work best for you – just make sure they aren’t based offshore for tax purposes!

If you’re still unsure about how to proceed, your Consultant at World Class Teachers will be more than happy to help! Contact us today!