PAYE
Pay As You Earn — the UK tax system where income tax and employee NI are deducted at source before wages are paid. All umbrella workers are on PAYE.
PAYE (Pay As You Earn) is the UK's mechanism for collecting income tax and employee National Insurance in real time — deducted from wages before they are paid to workers.
All umbrella company workers are employed on PAYE. The umbrella company calculates income tax using your tax code, deducts it from gross salary along with employee NI, and pays the net amount to you — reporting deductions to HMRC in real time via RTI (Real Time Information) reporting.
PAYE means you typically do not need to file a self-assessment tax return — all tax is handled by the umbrella. However, if you have other income sources (rental income, investments) you may still need to self-assess.
Your payslip should show your PAYE tax code (typically 1257L for 2026/27 if you have the standard personal allowance), gross pay, tax deducted, NI deducted, and net pay.