Expenses and Tax??

radioguy

Im working under a umbrella company who do all my tax and wages for me however im confused about my expenses? i claim milage allowance and other expenses every week and i dont seem to be getting any money back? how does it work,this is important as i have to work out my daily rate for work i can calculate how much after tax but if its taken off my tax how much do they give me back?? heeeelp

HappyMJ

radioguy wrote: »

Im working under a umbrella company who do all my tax and wages for me however im confused about my expenses? i claim milage allowance and other expenses every week and i dont seem to be getting any money back? how does it work,this is important as i have to work out my daily rate for work i can calculate how much after tax but if its taken off my tax how much do they give me back?? heeeelp

Exactly what does your pay advice say? Gross income less expenses less tax less ni plus expenses?

PasturesNew

Usually it's like this, using completely fake figures here for illustration:

£500 - weekly invoice
£20 - Umbrella fee
£50 - to go into the holiday pay pot
£50 - to go into the employer's NI pot

Umbrella invoice for £500 and receive the money. They then deduct their umbrella fee and the employer's NI and the holiday pay. What's left over is then your basic, which is £500-£20-£50-£50 = £380.

Then then run a payroll on you earning £380, out of which you pay employee's NI and tax, as normal employees do.

Same scenario if you claim expenses of £40 for petrol would be:

£500-£20-£50-£50-£40 = £340

Your basic is now £40 less. Tax/NI is calculated on the lower figure, then the £40 is slipped into your pay for the expenses and it's paid to you.

That's how it usually works. Your payslip should give you a complete breakdown of the figures.

pjclar02

Normally, the umbrella company will deduct a notional business expense figure from your gross income before calculating tax, and I think as you have eluded to, the business expense figure is then added back onto your net pay after tax and NI have been deducted.

You don't physically claim these business expenses from anyone - unless this forms part of the contractual agreement with the principal. The expenses are merely relevant to reduce the amount of tax that you pay.