A direct take-home comparison between working through an umbrella company and running your own Personal Service Company (PSC).
Umbrella company
You become an employee of the umbrella company, which invoices the client or agency and pays you via PAYE — Income Tax and National Insurance deducted exactly as they would be for any employee, plus an umbrella margin fee taken from your gross pay.
Your own PSC
You run a limited company, invoice the client directly (or via an agency), and pay yourself through a combination of salary and dividends — offering more control and, if you’re genuinely Outside IR35, real tax efficiency, but with more administrative responsibility and cost (accountancy, compliance, filing).
Which one actually suits you
If your engagement is Inside IR35, an umbrella company is often simpler with little practical downside, since you’d be taxed similarly through a PSC anyway. If you’re genuinely Outside IR35 and plan to contract for a while, a PSC usually keeps more of your income — but the admin overhead is real and worth weighing honestly.
Compare both routes with the Payslp contractor calculator.
The admin trade-off, concretely
An umbrella company handles all payroll, tax, and compliance for you — genuinely lower effort, at the cost of the umbrella’s margin fee and no access to limited company tax planning. A PSC gives you full control and potential tax efficiency, but requires (or the cost of) an accountant, annual accounts, Corporation Tax returns, and ongoing compliance responsibility.
Frequently asked questions
Can I switch between umbrella and PSC between contracts?
Yes, many contractors do exactly this depending on each individual contract’s IR35 status and their own risk appetite at the time.
Does umbrella company choice matter?
Yes — margins and compliance standards vary considerably between umbrella providers, worth comparing rather than assuming they’re all equivalent.