Umbrella Companies in 2025: Why More Contractors Are Making the move

In recent years, an increasing number of contractors have made the move to using an umbrella company. In the context of stricter IR35 rules, an increasing number of contractors are choosing an umbrella company over setting up their own limited company.

If you’re a contractor weighing up your options, Umbrella Search has put together this guide looking at why umbrella companies are on the rise and what to look out for when choosing one to work with

Why are Umbrella Companies so popular in 2025?

Let’s start by taking a look at why umbrella companies have become so popular in 2025.

IR35 made easy

Every contractor will be aware of IR35 and recent reforms that have taken place in recent years, with the responsibility of determining tax status put onto the end client. This has led to thousands of contractors being misclassified and paying more tax than needed.

For this reason, thousands of contractors have turned to an umbrella company over a limited company, meaning they don’t have to worry about IR35 and getting caught out. 

As an umbrella company employs the contractor, questions over IR35 don't come into play. That means no worrying or stressing over IR35 and an easier life for the contractor.

Less admin, more time to focus on what matters

Setting up and running a limited company takes time and ongoing work. From dealing with accountants, juggling tax deadlines, ongoing bookkeeping, to general admin, there's a lot that limited company contractors have on their plates.

With no limited company to set up, umbrella company contractors can focus on what matters, the contract at hand.

An umbrella company takes care of all the contractor’s finances and deals with their tax affairs through pay-as-you-earn, so umbrella company contractors can rest assured that all is in hand.

Benefit like an employee

If you’re looking for the freedom of self-employment, but would like the security of employment, using an umbrella company is for you.

An umbrella company provides the contractor with statutory rights, which include holiday pay, sick pay and maternity/paternity leave. For many contractors, this security net is highly valuable and one of the main reasons to switch to an umbrella company.

Financial security

Another benefit of working through an umbrella company is the financial security and certainty it brings.

Rather than waiting on invoices being paid by clients and dealing with subsequent cashflow issues, an umbrella company deals with invoicing the client and will pay the contractor on a regular schedule, either weekly, fortnightly or monthly. That means the contractor always knows their pay cheque will be with them on time.

What’s more, having a regular income makes things such as getting credit, a loan or a mortgage much easier. 

The umbrella company will also take care of the contractor’s tax, using the PAYE tax system to ensure the correct levels of tax and National Insurance are taken from their pay before it’s paid. This means no nasty surprises when it comes to paying tax bills, as you're always up to date with what you owe.

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Reputation and reviews

It's also helpful to look at the umbrella company's reputation and reviews. You can do this by simply carrying out a quick Google search. Do they have Google reviews or a Trust-pilot page? Take a look at what other customers are saying.

It can also be handy to get recommendations from fellow contractors. After all, a recommendation from somebody you trust is a great reference.

Take-home pay transparency

Understandably, you'll want to know how often and when you'll be paid. Some umbrella companies offer daily payments, while others will just run the payroll once and offer monthly payments. Whatever their payment schedule, it's important to find an umbrella company that works for you in terms of when you’ll be paid.

Service and support

Some umbrella companies will offer just a basic level of service, whereas others will offer additional perks and extras that can make your life as a contractor much easier.

If you’re looking for extra support, make sure you compare exactly what each company offers to ensure you're getting the service you require.

Next steps – find the best umbrella company with the help of Umbrella Search

Choosing to work through an umbrella company is no longer just a second choice to avoid IR35 — it’s a strategic, sensible choice for thousands of contractors in 2025.

Not only does this route help contractors avoid IR35, but it also offers a plethora of benefits that help to make contractors' lives easier and less stressful.

Although we’ve outlined what you should look out for when choosing an umbrella company, it can be challenging to know where to start. Thankfully, Umbrella Search is here to help.

Get in touch with our team of experts today, and we will work closely with you to find out precisely what you're looking for in an umbrella company and what budget you're working with to find you a list of the best umbrella companies that suit your needs. What's more, we only ever work with umbrella companies we know we can trust, with glowing reviews and solid reputations, so you know you're making the right decision.

Get in touch with the Umbrella Search team today.

Which industry are you contracting in?

• IT & Tech
• Finance
• Medical
• Other

FAQ's

How can I get more money in umbrellas for contractors?

If you're working through an umbrella company, your take-home pay can vary depending on fees, expenses, and the company's structure. Learn how to maximise your earnings with tips on claiming allowable expenses, checking for hidden fees, and comparing umbrella providers.

What is an umbrella company for contractors?

An umbrella company acts as your employer for tax purposes while you work as a contractor. It handles your payroll, deducts tax and National Insurance, and pays you a salary. This is often used when working inside IR35 or on short-term contracts.

What is the difference between a limited company and an umbrella company for contractors in the UK?

A limited company gives you more control and potential tax efficiency, but comes with extra admin and compliance responsibilities. An umbrella company is simpler — you become a PAYE employee — but often results in lower take-home pay. It depends on your contract, IR35 status, and personal preference.

What are the best umbrella companies for contractors in the UK?

The best umbrella companies are FCSA-accredited, transparent about fees, and offer responsive customer service. Some top-rated umbrella providers in the UK include Parasol, Brookson, Orange Genie, and PAYE Umbrella. Always compare based on your industry and contract rate.

What is the best umbrella company for IT contractors in the UK?

IT contractors often look for umbrella companies that understand IR35, offer tech-friendly portals, and provide faster payments. Look for ones with strong compliance, flexible payment schedules, and good reviews from other tech professionals.

Are there umbrella companies specifically for UK contractors?

Yes, most umbrella companies in the UK are designed specifically to support contractors in sectors like IT, construction, healthcare, and finance. They handle UK tax, pensions, and compliance requirements under HMRC rules.

Do umbrella companies offer pension schemes for contractors?

Many umbrella companies offer pension schemes through auto-enrolment. You can also request to make additional contributions. Ask your umbrella company if they support salary sacrifice or other pension options to increase tax efficiency.

What are the umbrella insurance requirements for contractors?

Contractors may need professional indemnity, public liability, and employer’s liability insurance. Some umbrella companies include these as standard, while others charge extra. Always check what’s included in your package.

Would an umbrella policy cover a contractor working for your company?

Yes, most umbrella companies provide employer’s liability insurance and other protections that would cover you while working on a contract. However, you may still need your own specialist cover depending on the project or client.

What is the usual cost of umbrella insurance for contractors?

The cost varies based on your industry, risk level, and coverage amount. Many umbrella companies bundle this into their margin. Standalone umbrella insurance for self-employed contractors can range from £100 to £500 per year depending on coverage.