Generally speaking, contractors and freelancers employed by an umbrella company do not need to submit a personal tax return because they are taxed at source (PAYE).
However, in some circumstances, individuals who use umbrellas are still required to file a tax return and pay additional income tax to HMRC.
In most cases, umbrella workers do not need to file a tax return. However, if you have additional income that hasn’t been taxed, receive certain benefits, or fall into specific HMRC categories, you may still be required to complete a self-assessment tax return.
This could be because you or your partner receives child benefits or you have other sources of income, such as rental income or investments.
Keep reading, and we’ll explain more about umbrella companies and tax returns to help you identify whether or not you need to submit one.
Umbrella companies and PAYE
More and more people use umbrella companies, especially following the Off-Payroll (IR35) reforms, which significantly reduced the number of limited company contractors working directly for end clients.
By processing payroll through HMRC’s Pay As You Earn system, umbrella employees are taxed at source, and their net salary is paid after deductions have been made and paid to HMRC.
If a worker’s only source of income is from an umbrella company, they will not need to submit a personal tax return. This is because they will have paid the correct amount of income tax and National Insurance through PAYE.
However, if an umbrella employee has any additional sources of income, they may be required to file a tax return for the appropriate tax year.
When do umbrella company employees have to file a tax return?
If your only income in a tax year (from April 6th to April 5th) is paid to you through an umbrella company, you won’t be required to submit a self-assessment tax return.
However, if you have any additional sources of income, you might need to pay tax on them.
Despite being paid for your temporary assignments through an umbrella company, if any of the following apply to you, you might need to complete a self-assessment tax return:
- You’re a company director with income through this business that is not taxed under Pay As You Earn (PAYE).
- You earn money via renting properties (buy to let).
- Before tax, your annual income exceeds £150,000.
- You have income from trusts and settlements.
- You have claimed over £2,500 worth of expenses.
- You have capital gains.
- You have received an inheritance.
- You have experienced changes to your tax code, resulting in underpayment of tax during the tax year.
- You have income from savings and investments that exceeds £10,000.
- You have foreign income that is subject to UK tax.
- You receive child benefits and your adjusted net income exceeds £60,000. See our guide to the High Income Child Benefit Charge.
These are the most common reasons you may be required to submit a personal tax return, even if you use a PAYE umbrella company for your assignments.
You can check if you must submit a tax return by completing a short HMRC questionnaire.
How to register for self-assessment
If you need to submit a tax return, you must first register with HMRC.
As umbrella workers are employees, most people will need to follow the guidance for those not self-employed.
You must register by 5 October following the end of the tax year. For example, for the 2025/26 tax year, the registration deadline is 5 October 2026.
If you have not registered before, you can do it online.
After registering, HMRC will issue a Unique Taxpayer Reference (UTR), usually within 10 days. You can then access your account and file your return.
When is the self-assessment deadline?
If you need to submit a tax return, the deadline is 31 January following the end of the tax year.
For example, for the 2025/26 tax year, the deadline is 31 January 2027. Missing this deadline usually results in an automatic £100 penalty.
Filing a tax return can feel daunting if you are new to the process. Many contractors choose to use an accountant to ensure everything is submitted correctly and on time.
Fees are often reasonable, and an accountant can also assist with registration if needed. Find a contractor accountant here.
Conclusion
If you are employed by an umbrella company and this is your only source of income, you will not usually need to submit a tax return, as tax is handled through PAYE.
However, if you have other income or fall into certain categories, you may still be required to complete a tax return.
If you are unsure, use HMRC’s online checker or speak to an accountant to confirm your position.
