If you work through an umbrella company, you may assume there are very few expenses you can claim. In many cases, that’s true. Rules introduced in recent years have significantly restricted what umbrella employees can deduct.
But that doesn’t mean there’s nothing available.
There are still legitimate expense deductions and tax relief opportunities that contractors often overlook. The key is understanding the rules properly and knowing the difference between allowable relief and schemes that could land you in trouble.
If you’re unsure about the basics, this guide to umbrella company expenses explains what umbrella employees can and cannot claim.
Why Most Umbrella Contractors Can’t Claim Travel Expenses
One of the biggest areas of confusion is travel and subsistence.
Since the introduction of Supervision, Direction and Control (SDC) legislation in 2016, most umbrella contractors are no longer allowed to claim tax relief on ordinary commuting. If you’re under SDC, your place of work is not considered a temporary workplace for tax purposes.
If you’re unfamiliar with how these rules work, this article explains why you should be cautious of umbrella companies promoting expense claims:
Be wary of any umbrella company that’s actively promoting expenses
In short, if an umbrella company is aggressively advertising high take-home pay through expenses, that should raise a red flag.
Pension Contributions Through Salary Sacrifice
One commonly overlooked opportunity is pension salary sacrifice.
If your umbrella company offers a salary sacrifice arrangement, pension contributions are deducted from your gross pay before Income Tax and National Insurance are applied. This reduces your taxable income and can improve your overall tax efficiency.
Over the course of a year, the savings can be meaningful, especially for higher-rate taxpayers.
Many contractors focus only on expenses, but pension contributions can often have a greater long-term financial impact.
Professional Memberships and Subscriptions
Certain professional fees may qualify for tax relief if they are approved by HM Revenue & Customs and directly relate to your role.
This can include:
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Industry body memberships
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Trade union subscriptions
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Required professional accreditations
If your umbrella company does not reimburse these costs, you may be able to claim tax relief through your tax return or by adjusting your tax code.
For broader guidance on what umbrella employees can claim or be reimbursed for, see this detailed guide to umbrella company expenses and reimbursements.
Home Working Allowance
If you are required to work from home and your umbrella company does not reimburse you, you may be able to claim a flat-rate home working allowance.
This isn’t a large amount, but it can help cover additional household costs such as heating and electricity. The key requirement is that you must be required to work from home, not simply choosing to do so.
This is one of the most commonly missed tax reliefs among umbrella employees.
Work-Related Training
Training expenses can sometimes qualify if they maintain or update skills required for your current contract.
For example:
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Continuing professional development (CPD)
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Mandatory certifications
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Industry safety training
However, training that prepares you for a completely new career path usually does not qualify.
Because training rules can be complex, it’s worth reviewing official guidance or checking umbrella company FAQs before assuming a cost is deductible. The UmbrellaCompanies.org.uk umbrella company FAQs provide useful clarification on common contractor questions.
Understanding Deductions vs. Expenses
Another common misunderstanding is confusing umbrella payroll deductions with expenses.
Umbrella employees will see deductions such as:
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Income Tax
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Employee National Insurance
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Employer National Insurance
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Apprenticeship Levy
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Umbrella margin
These are not expenses you can claim back. They are part of the umbrella employment model.
It’s also important to understand how umbrella margins are charged, which is explained here:
Umbrella company fees – everything you need to know
Understanding this structure helps you separate legitimate tax relief from normal payroll costs.
Avoiding Risky Expense Schemes
If an umbrella company promises unusually high take-home pay through expense claims, be cautious.
As explained earlier, SDC rules mean most travel and subsistence claims are not allowable. Schemes that attempt to bypass these rules can create compliance risks for contractors.
When in doubt, stick with compliant, transparent providers and rely on verified guidance rather than marketing promises.
The Bottom Line
Expense deductions for umbrella contractors are more limited than they once were. Travel and commuting claims are usually not permitted under SDC rules.
However, legitimate opportunities still exist, including:
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Pension salary sacrifice
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Approved professional memberships
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Home working allowance
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Certain work-related training
The key is understanding the rules and avoiding aggressive schemes that sound too good to be true.
If you’re unsure how your current umbrella handles expenses and deductions, reviewing their processes and comparing them with independent guidance can help ensure you’re operating compliantly and efficiently.
Small, legitimate tax reliefs claimed properly over a full contract year can make a noticeable difference.
