tax credits when with umbrella company

ozalet

Hope someone can help as I cant get hold of the tax credit helpline.

I need to work out my earnings from the last tax year for the tax credit renewal forms. I have been paid via a umbrella company in my last temporary employment.

For this period my gross pay for the year was £2636 and taxable pay for the period is £1659. The umbrella company have sent me a statement of earnings along with a P60 which has my total for the year as £1659.

Employ-e informed me that I can quote £1659 as my total pay for tax credit purposes, but im worried as that figure isnt my gross pay.

can anyone help?

zagfles

The P60 is probably the correct figure to use for tax credits, but what's the reason for the big difference in "gross pay" and "taxable pay"?

ozalet

zagfles wrote: »

The P60 is probably the correct figure to use for tax credits, but what's the reason for the big difference in "gross pay" and "taxable pay"?

here is an example for a week:

Gross: £228.00

Taxable £145.00
Less
Tax £0.25
NI: £0.72
Add
Expenses: £62.36

Non Taxable
£82.99

EE Holiday Accural: £20.63

Net Pay: £206.39

Please note that the employment agency filled in my expenses, and it seems crazy as i dont spend £62.36 per week. When I called the umbrella company employ-e they said it was legit how they work out my expenses as I am entitled to it.

zagfles

I presume they have a dispensation from HMRC to pay expenses gross? If it's OK for tax it should also be OK for tax credits.

SteProud

It's legit if you have a full contract of employment with the umbrella so that technically they are your employer.

You should also have receipts for your expenses.

soylent_pink

and don't forget to declare any dividends

Notmyrealname

ozalet wrote: »

Hope someone can help as I cant get hold of the tax credit helpline.

I need to work out my earnings from the last tax year for the tax credit renewal forms. I have been paid via a umbrella company in my last temporary employment.

For this period my gross pay for the year was £2636 and taxable pay for the period is £1659. The umbrella company have sent me a statement of earnings along with a P60 which has my total for the year as £1659.

Employ-e informed me that I can quote £1659 as my total pay for tax credit purposes, but im worried as that figure isnt my gross pay.

can anyone help?

The taxable pay is the figure you give. The higher amount includes recompense for expenses.

Notmyrealname

zagfles wrote: »

I presume they have a dispensation from HMRC to pay expenses gross?

You have no idea what you are on about. As long as the expenses are within the HMRC limits for each category, i.e mileage at HMRC rates, then the expenses are free of tax.

shedboy94

ozalet wrote: »

here is an example for a week:

Gross: £228.00

Taxable £145.00
Less
Tax £0.25
NI: £0.72
Add
Expenses: £62.36

Non Taxable
£82.99

EE Holiday Accural: £20.63

Net Pay: £206.39

Please note that the employment agency filled in my expenses, and it seems crazy as i dont spend £62.36 per week. When I called the umbrella company employ-e they said it was legit how they work out my expenses as I am entitled to it.

This makes no sense......who the hell pays 25p tax on £228 gross income........and 72p in NI

It is your GROSS pay that needs to be declared.

Presumably you were only working for a few weeks in the year - that is why your income is so low?

Icequeen99

It sounds like the OP is part of a travel and subsistence scheme. Although financially beneficial for the employee (both from a tax and NI perspective and tax credits), the motivation for doing it is because it is beneficial for the person paying the employee.

You have to be careful though that the expenses are actually incurred and reasonable.

In essence the OP gets to declare a lower income for tax credits, as it is less the expenses.

There was a consultation document a couple of years ago which explains some examples of his this works: http://www.hm-treasury.gov.uk/d/consult_minimumwage_expenses.pdf (although focused on those getting NMW).

IQ

zagfles

Notmyrealname wrote: »

You have no idea what you are on about. As long as the expenses are within the HMRC limits for each category, i.e mileage at HMRC rates, then the expenses are free of tax.

More of an idea than you, clearly. I know they're free of tax, but the employer needs to have a dispensation to pay them without declaring them. Try reading this and educate yourself:

http://www.hmrc.gov.uk/paye/exb/schemes/dispensation.htm