Paystream vs Parasol
PayStream vs Parasol. The Role of Umbrella Companies in Contracting
Before we dive into PayStream vs Parasol, and help you choose the right umbrella company for your business, we need to look at what an umbrella company is. Do you know what they do? Do you know why they exist?
At Go Limited, we consider ourselves to be umbrella company and limited company experts, and this extends to helping contractors find the right contracting approach for them. Regardless of the industry that you work in, or the clients you work with, you need to decide whether an umbrella company ticks enough boxes.
What is an Umbrella Company?
To put it simply, an umbrella company acts as a ‘middle man’ between you and your client, officially employing you and handling your payroll. Whereas sole traders and limited company contractors have to handle their own income, National Insurance Contributions and Income Tax, contractors working with an umbrella company have everything handled for you. This structure allows you to work on temporary or project-based contracts, without having to run a limited company or worry about the admin side of things.
IR35 Legislation and Its Impact on Contracting
IR35 legislation changed the way contracting works in the UK. As a set of tax rules designed to prevent disguised employment - where someone works as if they’re an employee, but they actually operate through a limited company to pay less tax - you need to be aware of how it impacts your approach to contracting.
If you're deemed to be working inside IR35, you're taxed like an employee. This means that running a limited company becomes less financially beneficial, as you’re not privy to the tax-efficient benefits. But, umbrella companies offer a compliant and efficient way to stay on the right side of IR35, whilst also avoiding the admin and legal responsibilities of running a business.
How Does an Umbrella Company Work for Contractors?
There’s a lot of advantages that come with working under an umbrella company, and it’s something a lot of contractors do. All you need to do is find a contract, sign up with an umbrella company, and work as usual. Instead of invoicing your client directly, you submit timesheets and report your hours to the umbrella company. They invoice the client, deduct NICs and Income Tax, and pay you via PAYE. This process means that you don’t need to handle invoices, taxes, or chase clients for payment yourself.
Why Contractors Choose Umbrella Companies
A lot of contractors in the UK choose to work with an umbrella company - with many comparing PayStream vs Parasol, two of the most popular options - and with good reason.
- No Setup Needed - When you choose to work with an umbrella company, you don’t have to register a company, deal with HMRC or open a business bank account. You sign up, start working and enjoy the simplicity.
- PAYE Simplicity - There’s a lot of income complexity when you’re handling everything yourself. But, when you work with an umbrella company, Income Tax and NICs are taken care of for you. There’s no self-assessment, and no tax to pay at the end of the year.
- Compliance with IR35 - If you’re working inside IR35, an umbrella setup ensures that you're operating within the law, whilst also keeping your workflow intact. But, if you’re working outside IR35, setting up a limited company means being able to claim expenses and operate in a tax-efficient way.
- Professional Appearance - There’s a lot of contractors out there, and working with an umbrella company can create a professional appearance. Clients know what to expect when working with contractors through trusted umbrella firms, giving them peace of mind. But, there are many clients that prefer to work with limited companies.
- Flexibility - When you work with an umbrella company, you benefit from the flexibility of being able to scale up and down your workload. You can start or stop easily, switch contracts, and even move to a limited company setup later if it makes financial sense.
PayStream vs Parasol: Why Parasol and PayStream Are Umbrella Company Front-Runners
Though there are a number of umbrella companies to choose from, Parasol and PayStream are the front-runners in terms of popularity. Whether you ask recruiters, contractors or industry insiders, Parasol and PayStream are the two names that come up time and time again. They’re established, well reviewed, and designed with contractors in mind. But, how do you choose which one is best for you?
How Does an Umbrella Company Work for Contractors?
There’s a lot of advantages that come with working under an umbrella company, and it’s something a lot of contractors do. All you need to do is find a contract, sign up with an umbrella company, and work as usual. Instead of invoicing your client directly, you submit timesheets and report your hours to the umbrella company. They invoice the client, deduct NICs and Income Tax, and pay you via PAYE. This process means that you don’t need to handle invoices, taxes, or chase clients for payment yourself.
Why Contractors Choose Umbrella Companies
A lot of contractors in the UK choose to work with an umbrella company - with many comparing PayStream vs Parasol, two of the most popular options - and with good reason.
- No Setup Needed - When you choose to work with an umbrella company, you don’t have to register a company, deal with HMRC or open a business bank account. You sign up, start working and enjoy the simplicity.
- PAYE Simplicity - There’s a lot of income complexity when you’re handling everything yourself. But, when you work with an umbrella company, Income Tax and NICs are taken care of for you. There’s no self-assessment, and no tax to pay at the end of the year.
- Compliance with IR35 - If you’re working inside IR35, an umbrella setup ensures that you're operating within the law, whilst also keeping your workflow intact. But, if you’re working outside IR35, setting up a limited company means being able to claim expenses and operate in a tax-efficient way.
- Professional Appearance - There’s a lot of contractors out there, and working with an umbrella company can create a professional appearance. Clients know what to expect when working with contractors through trusted umbrella firms, giving them peace of mind. But, there are many clients that prefer to work with limited companies.
- Flexibility - When you work with an umbrella company, you benefit from the flexibility of being able to scale up and down your workload. You can start or stop easily, switch contracts, and even move to a limited company setup later if it makes financial sense.
PayStream vs Parasol: Why Parasol and PayStream Are Umbrella Company Front-Runners
Though there are a number of umbrella companies to choose from, Parasol and PayStream are the front-runners in terms of popularity. Whether you ask recruiters, contractors or industry insiders, Parasol and PayStream are the two names that come up time and time again. They’re established, well reviewed, and designed with contractors in mind. But, how do you choose which one is best for you?
PayStream vs Parasol: Which One Should You Choose?
Both Parasol and PayStream offer compliant, dependable umbrella services, and choosing either is unlikely to be a bad choice. But, they cater to slightly different types of contractors. Choose Parasol if you want a straightforward, contractor focused umbrella company solution with a strong personal touch. But, if you want a technology-led experience and the option to upgrade to a limited company later, PayStream could be better. Whichever route you take, the key is understanding your contract status, your IR35 position, and your personal preferences around admin, control and long-term goals.
Once you’ve decided between PayStream, Parasol and setting up a limited company, you need to put plans into action. This is where Go Limited comes in. At Go Limited, we support contractors on their journey to business success, and that often means setting up a limited company. With the right setup in place, you’ll not only stay compliant, but you’ll build a contracting career that’s designed with you in mind.
FAQ
What is an umbrella company?
An umbrella company acts as an employer for contractors who work on fixed-term assignments, usually through a recruitment agency. It handles all payroll responsibilities, including tax, National Insurance, and workplace pension contributions, making it easier for contractors to get paid without running a limited company.
Can I be forced to use an umbrella company?
No, you can’t be forced to use a specific umbrella company. However, some recruitment agencies may work only with preferred providers or insist on a compliant model like PAYE through an umbrella. That said, you’re still entitled to ask for alternatives or choose your own umbrella company—especially one that suits your financial and compliance needs.
How much do umbrella companies take?
Most umbrella companies charge a weekly or monthly margin—typically between £15–£30 per week. However, the overall cost to you includes more than just their margin. Your take-home pay is reduced by Income Tax, Employee’s National Insurance, and any pension contributions, all processed through PAYE.
Do umbrella companies rip you off?
No, umbrella companies don’t rip you off — but it’s important to understand how your pay is calculated. These providers work within the standard umbrella model, where employment costs such as Employer’s National Insurance, the Apprenticeship Levy, and a fixed margin are deducted from your assignment rate before your gross pay is calculated and taxed through PAYE.
This structure can sometimes feel unclear, especially if you’re new to umbrella working. That’s why it’s essential to review a detailed pay illustration before signing up. A proper illustration should break down your rate, all deductions, and your estimated take-home pay — helping you see exactly where your money is going. Parasol and Paystream both provide transparent pricing and payslip breakdowns, so there are no hidden charges or surprises.
If your take-home pay feels lower than expected, the issue usually lies in how umbrella pay works — not in the provider doing anything unfair.
Does an umbrella company have to offer a pension?
Yes. Umbrella companies are legally required to auto-enrol eligible workers into a workplace pension scheme after 12 weeks, in line with UK pension regulations. You can opt out if you prefer not to contribute, but by default, they must offer it.
Can I pay into a pension through an umbrella company?
Yes, most umbrella companies allow you to pay into a pension through auto-enrolment, and some may support salary sacrifice schemes if you request it. Salary sacrifice can help increase your take-home pay slightly by reducing your taxable income—but not all umbrella companies offer this option, so it’s worth checking beforehand.
Important:
Please note: Any rates and thresholds mentioned in this article are correct at the time of publishing and may be subject to change.
When choosing an accountant, look for one with proven experience and expertise in the contracting sector, particularly around areas like IR35, limited company tax matters and off-payroll working. Formal qualifications are important, but relevant hands-on knowledge matters just as much — especially in a complex and fast-changing landscape like this.
