Basic question about expenses - Pretty much yes or no question almost

ultimatefighter

My company that I'm contracted for, to teach in a shool, used to pay expenses back in cheque form and now, it's moved to a new system of deducting expenses from gross income and then adding them back again.

Does this mean now that my expenses that are rent from where I have to now live, council tax and utilities are no longer paid in full but the maximum I can now have is my income tax and NI paid for?
(YES OR NO PART)

If anyone can look at my payslip below does this look right? If I have spent £94 on expenses and am paid £135 per day.... Shouldn't I get more back if I have expenses?

My tax code is the standard £10,000 allowance before tax is deducted
I have no BIK

5days @ £135 - £675
Expenses £94.10
Taxable pay £442.33
Teaching income £675
Less-
Reimbursed expenses £94.10
Margin £35
Employers NI £39.10
Holiday accrual £53.39
Holiday Accrual NIC Reserve £7.36
Employers Pension £3.30

PAYE NET £360.25
Reimbursed expenses £94.10

Pension contribution £2.64
Funds to Bank £451.71

Now on the next page weirdly the amount is different and begins on page 2 with:
PAYMENTS:
Salary £442.33 (this isn't £451)
Deductions: income tax £47.60
NI: £34.38 (two lots of national insurance?) why?
PAYE net pay: £360.25
MY ROUGH CALCULATION WITHOUT EXPENSE:
Assuming it was all taxable:
675 divide by 100 x 67 (20% tax and Ni @ 11%)
Minus 35 margin, minus 54 = £350 except I haven't spent £94 of my own money. Am I being an idiot here?

redpete

Why does the employer think you had £94.10 exp if you think it should be £87?

You don't pay 20% tax on all the teaching income, You earn a certain amount per month before you start paying tax.

You need to include your tax code for people to check the figures.

Looks like your expenses are deducted (paid by the employer to whoever) and then reimbursed (paid back to you). Net difference to you is £0, same as if you had paid out yourself and then got a cheque for that amount from the employer.

You haven't paid two lots of NI, on the first page is what the employer pays, on the second page is what you pay.

As for the rest of the figures - that looks like an unnecessarily complicated payslip .

chrisbur

This looks like you are being paid through an umbrella company is that the case?
Can you check your figures there does appear to be a couple of small discrepancies? eg
"Salary £442.33 (this isn't £451)
Deductions: income tax £47.60
NI: £34.38 (two lots of national insurance?) why?
PAYE net pay: £360.25"

I make it 360.35
Something similar in page 1 figures.

ultimatefighter

redpete wrote: »

Why does the employer think you had £94.10 exp if you think it should be £87?

You don't pay 20% tax on all the teaching income, You earn a certain amount per month before you start paying tax.

You need to include your tax code for people to check the figures.

Looks like your expenses are deducted (paid by the employer to whoever) and then reimbursed (paid back to you). Net difference to you is £0, same as if you had paid out yourself and then got a cheque for that amount from the employer.

You haven't paid two lots of NI, on the first page is what the employer pays, on the second page is what you pay.

As for the rest of the figures - that looks like an unnecessarily complicated payslip .

Thanks a lot for your help Pete. I got confused for a second. It was £94 that week. Why is the employers NI deducted from my wages though? And yes it is an umbrella company.
My tax code is for some reason not displayed on the pay slip but it will be the standard £10,000 earned tax free code as I don't have any BIK or anything.

As the expenses are offset against taxable income, this basically means that I don't really get reimbursed my exposes but simply just get taxed less for doing so..... ?

ultimatefighter

The query I had was about the expenses now not being rally reimbursed in full... And also why it seems like I'm better off not claiming any Expenses or even having any in the first place?

philip42h

As I read it, and I could be very wrong, you are not have your expenses reimbursed as such - rather, your expenses are being handled as being allowable against tax on your gross pay.

Putting the details in what seems to me a more logical order we get:

Teaching income from 5days @ £135 = £675

Less deductions of:

Expenses £94.10 (to be reimbursed before tax)
Margin £35
Employers NI £39.10
Holiday accrual £53.39
Holiday Accrual NIC Reserve £7.36
Employers Pension £3.30

sub total deductions = £232.25

Leaving Taxable pay of £442.33 (= £675.00 - £232.25) - there's a small discrepancy here so you may want to check your numbers and/or my sums.

Then to calculate the tax and NI due on the taxable balance:

Taxable income £442.33
Less Deductions:

income tax £47.60
NI: £34.38

Gives a net pay of £360.25 - again there's a small discrepancy here and I have to assume that the tax and NI due are calculated correctly.

You are then paid:

PAYE NET £360.25
plus Reimbursed expenses £94.10
less a Pension contribution £2.64

Giving a final "Funds to Bank" payment of £451.71

I don't know whether any of that helps but that's how I read it ...


Edit: and to try to answer the yes/no part of the question - your expenses are being paid in full and before tax but from your gross earnings (as I suspect was previously the case).

redpete

ultimatefighter wrote: »

Why is the employers NI deducted from my wages though? And yes it is an umbrella company.

Looks like the £635 is what the Local Authority / school pay for your services, your employer (the umbrella company) then take out their expenses (including Employer's NI) and profit (the £35) leaving a balance which is what you get paid (and from which is deducted your tax and NI).

ultimatefighter

Ok Red Pete. It's now clicked.

If I spent £94 on expenses,
And my pay is 675.... By them taking away 94 from that pay, firstly, I have now spent £180 as I am short £94 and they are making me first short another £94 out of my basic pay..... In deductions.... They take it away.
And then after the basic pay is now smaller at £360, they have added on the 94 THEY took away paying me back their own deduction which means I am still short £94.....

Does this make sense?
If all the money I had in the world
Is £100 and I spent £94 I have 6 quid left.
If I've earned £675 and the first deduction from that wage is now my expenses, I'm not gonna get back that 94 that I spent of the only £94 sum I get back is the expense they deducted firstly....

I think I've figured this. What do I do about this?

chrisbur

ultimatefighter wrote: »

Ok Red Pete. It's now clicked.

If I spent £94 on expenses,
And my pay is 675.... By them taking away 94 from that pay, firstly, I have now spent £180 as I am short £94 and they are making me first short another £94 out of my basic pay..... In deductions.... They take it away.
And then after the basic pay is now smaller at £360, they have added on the 94 THEY took away paying me back their own deduction which means I am still short £94.....

Does this make sense?
If all the money I had in the world
Is £100 and I spent £94 I have 6 quid left.
If I've earned £675 and the first deduction from that wage is now my expenses, I'm not gonna get back that 94 that I spent of the only £94 sum I get back is the expense they deducted firstly....

I think I've figured this. What do I do about this?

You have not confirmed that you are being paid through an Umbrella company but this seems to be the case so the following assumes that you are.

Your people you do work for pays the Umbrella company £675 for your services and £94 for your expenses.
The Umbrella company takes the £675 and deducts the £94 and other expenses (I make no comment on whether they are correct in doing this it is possible some of these expenses are not deductable I do not know) to arrive at the figure of £442.33 on which they work out tax and NI.
This net figure less pension is then paid to you with the £94 expenses added back on.

This reduces what you pay for tax and NI but you then have other costs as a result of being paid through an Umbrella company. Mainly their commission, employers national insurance, employers pension contribution, your holiday fund.
If you were employed by the people you work rather than an Umbrella company I would assume they would not be paying you as much as they would then have the additional costs of the employers NI, employers pension, holiday pay etc.

If you wanted to be paid another way you would need to speak to the people you work for but I doubt if they would want to run a payroll and I would assume you would be paid at a lower rate if they were prepared to do it.

Regarding the expenses you are getting these, they are deducted from the £675 for calculation of tax and NI and are then added back onto the net pay for payment to you.
See below

Regarding paying two lots of NI yes you are that is the way Umbrella companies work they are technically your employer so they have to pay it but they only get commission for doing the wages so it gets deducted from your wages. If they paid it their commission would have to be higher to cover it, and if you were employed by the people you work for they would pay it and pay you a lower rate to cover this additional expense.
The following is an explanation given by an Umbrella company...
"Question:
I am working for an agency and the company they use for paying me are deducting the employers national insurance as well as my own national insurance every week is this the correct procedure.
Answer:
An umbrella company is an employer and, as with any other UK employer, we have a legal obligation to pay employer’s national insurance contributions to HMRC.

Basically a compliant umbrella company should employ you under an over-arching contract of employment and would then enter into a business to business contract with the recruitment agency or client. They should then raise an invoice for the hours/days that you worked which would be sent to the agency/client with whom they are contracted. Payment would be made to the umbrella company to the value of that invoice and they would then pay the employer’s national insurance contribution from the amount received and they would also retain their margin. The balance is your salary which would be subject to deductions for income tax and employee’s national insurance. This model is the same for all umbrella companies as they all have to comply with the regulations which surround PAYE."


Edit Regarding the bold underlined section after rereading and thinking about this I believe that this is wrong and the Op is not getting their expenses. I have listed my new workings in a new post below.

chrisbur

I have now had another look at all these figures and I do believe that they could be wrong.
It looks to me as if the people you work for are paying to the Umbrella company £675 for work done and £94.10 for expenses. If this is the arrangement and not something like £675 which includes £94.10 for expenses then most of their calculations are wrong.

Working on the basis of £675 plus £94.10 for expenses.

Why deduct the £94.10 from the £675 when it was not included in that in the first place. You either start with £769.10 (ie £675 plus £94.10) then deduct £94.10 and the rest or you start with £675 and just deduct the rest.
(Just to repeat I have no idea if they are allowable deductions)
If we start with £769.10
We deduct
94.10 exp
35.00 margin
51.00 ers NI
53.39 hol acc
7.36 hol NI
3.30 ers pension

Taxable pay £524.95 less
64.00 tax
44.60 NI

net pay 416.35
Reimbursed expenses 94.10
pension 2.64

Funds to bank 507.81

These figures are not 100% accurate as the employers NI needs fine tuning and holiday and pension may be based on a percentage which could now be different.

But the principle is that by deducting the expenses from the £675 which did not include the expenses rather than the £769.10 which did they have started with a gross that is £94.10 to low, so have not deducted enough tax or NI and have not paid you your expenses.

ultimatefighter

Ok. Now I think it's all clear to me now.

It's so simple.

If I have spent 94 and my company will cover expenses.
If the first thing they do is deduct from my basic pay the expenses, I'm not being given them at all.

If they didn't put that £94 back after deductions I would be £188 down.

Am I right or am I wrong?