Umbrella company - taxes

wotcher321

Hello !

I've started a new job on 1 August and i've been on the emergency tax code till last week : 1100L/X.
The same week i got my P45 and emailed it to this umbrella company which manages my payrolls and moved me to the correct tax code : 1100L.

I work 54 hours per week (570 gross income) and till this week i paid around 150 pounds taxes: 47 to HMRC payment NIERS(What is this?), 15 for umbrella's company margin, 57 for Tax and 41 for NI.

With the new code, applied this for the last worked week i'm being deducted 210 pounds taxes : 48 HMRC payment NIERS, 15 Umbrella's company margin, 101 Tax and 42 N.I.

I find this to be very high and i'm thinking of leaving the job because it seems it doesnt worth the hours spent working and being deducted so much. Is it the way it should be?

Darksparkle

Your tax code would only impact on the tax, not the NI.

You are paying both employee and employer NIC. I believe this is normal for umbrella companies. If anything your NI is a little low, should be £49 (EE) and £57 (ER)

As for tax, it would depend on your taxable pay to date and tax paid to date.

wotcher321

Well, on my previous job, P45 says : Total Pay to date : 7135 and Tax : 537
On my current job last Payslip : Gross Pay YTD: 10023, Tax YTD : 903
On the Payslip for the week before Gross Pay YTD was 2381, and Tax 264.

If it's all correct, i'm not too happy about umbrella's companies.
Taxes adds up and are too high. Hopefully, i will get a contract directly with the company, not through agency/umbrella's.

Thank you.

Darksparkle

Your YTD tax is correct (I calculated £1 difference as I've calculated monthly rather than weekly).

The tax you pay in an umbrella company is no different than if you were paid normally. Tax is simply taxable income less personal allowance x appropriate %

It's the NIC and other charges however you should have negotiated a higher pay rate to take that into account.

Dazed_and_confused

Tax may be higher this week as a one off, particularly if previously you have been paid twice in one tax period for example. old P45 company paid you (even a small amount) for week 15 and new umbrella company also paid you in tax week 15.

Best thing is to get your latest payslip and check all is upto date tax wise for this pay period using an online calculator and then plug in next week's pay using the appropriate next pay week and check what tax is due.

You may find tax next week returns to closer to what you have been used to

chrisbur

The following calculations are not exactly as PAYE is calculated but they give a very close approximation. The figures that you quote suggest to me that you are rounding a bit, that you get some of your pay as tax exempt and that your actual earnings vary a bit from week to week. All of this will also make my figures a bit less than 100% accurate but hopefully you will see what has happened.

The P45 figures of 7135 gross and 537 tax show that it was issued in week 21. 7135 less 4442 (21/52 of 11000) is 2693 which at 20% is 538.60 (Told you we are working rough figures)

Your last payslip figures of 10023 gross and 903 tax show that was issued during week 26. 10023 less 5500 (26/52 of 11000) is 4523 which at 20% is 904.60

Your payments up to last week's payslip were 2381 gross and 264 tax show that you have been paid for 5 weeks at that point. 2381 less 1058 (5/52 of 11000 ) is 1323 which at 20% is 264.60.

The last payslip you received worked out tax due as at week 26 and included the P45 figures for week 21 the previous 5 weeks wages in your new job and 1 week for this week which adds up to 27 weeks. This meant that there was no tax allowance left for this week's wages so tax was deducted from your full taxable gross.

This is something that happens now and then, it may be due to a slight difference in paydays, a change from arrears to current pay or the old employer making a late payment after you had left. Whatever the cause the correction has now been made and your tax from now on will be as before when you were on emergency tax, well a very tiny bit higher probably because a non-cumulative tax code gives for most people a tiny bit lower tax to pay than a cumulative tax code, just a few pence here and there.

wotcher321

Thank you for your explanations. It all makes sense now.

Indeed, i was paid twice for week 21 by the last agency i was with (payment for remaining days of holiday) and first payment of the currrent agency / umbrella company.

I will bring news next Wednesday with the next PaySlip and hope it will all even out.
I'm very glad i found my answers here.

Later Edit : Everything went back to how it initially was. I'm being taxed as before.