Umbrella Company deductions

keplpies

Andy_L said:

keplpies said:

We are already being taxed and paying national insurance.  Can somebody state simply why we are paying twice?

There are employers NI contributions (which the umbrella company is paying) as well as the employees contributions (which you are paying).

Thanks. 
My colleagues are adamant that this should not be the arrangement, but I'm guessing it is fine.

Sandtree

Andy_L said:

keplpies said:

We are already being taxed and paying national insurance.  Can somebody state simply why we are paying twice?

There are employers NI contributions (which the umbrella company is paying) as well as the employees contributions (which you are paying).

I think this language adds to the confusion... if you were a regular employee of the company you were doing the work for then absolutely your employer pays the employers NI (hence the name) but in the model of using an umbrella your day rate has to pay both the employers and employees NI contributions and so effectively you pay both sides. 

Sandtree

chrisbur said:
I personally am not fully convinced but doubt there is anything you can do about it other than find a PAYE job.

What are you not convinced about?

The OP is getting paid £144 per day... that means £144 (plus VAT that goes off to HMRC) goes off to the umbrella... the £16 a week pays for their staff, any insurances required, their profit etc 

Where do you think the employers NI should come from if not the £144? The umbrella cannot pay it from their own pocket given they charged £16 but there was £74.76 of HMRC employers costs to pay for the same period.

The only other option is to scrap IR35 and all these other off payroll laws and allow people to operate as self employed or via their own limited company so that people can manipulate their incomes to avoid paying NI by taking all their money as dividends or liquidating for entrepreneurs relief etc

General_Grant

chrisbur said:

keplpies said:

We are already being taxed and paying national insurance.  Can somebody state simply why we are paying twice?

There is an explanation of umbrella companies here....
https://www.gov.uk/guidance/working-through-an-umbrella-company

The section "How you get paid" is the bit that explains the employers NI part.
I personally am not fully convinced but doubt there is anything you can do about it other than find a PAYE job.

I provided that link in the first reply to the OP, a couple of hours after they posted two days ago.  I think they were looking for a fully digested explanation here.

keplpies

I provided that link in the first reply to the OP, a couple of hours after they posted two days ago.  I think they were looking for a fully digested explanation here.

Hi, thanks for the link (I'm new so couldn't respond to the original comment).  It makes sense, my colleagues and I are wondering why we are paying the employer-based NI.  I assume its proper, but my workmates are not so sure.

Sandtree

keplpies said:

Hi, thanks for the link (I'm new so couldn't respond to the original comment).  It makes sense, my colleagues and I are wondering why we are paying the employer-based NI.  I assume its proper, but my workmates are not so sure.

It is an accepted and most common way these things works... there are some that would instead advertise the role at £120/day rather than £144 but state they are paying the employers NI but even if the net position is identical the reality is people look at the gross number.

Things have tightened up in recent years thanks to IR35 changes etc but there were in the past other types of umbrella companies out there that would only pay you national minimum wage and the rest of the money went via some "offshore investment" or "loan scheme" as a mechanism of tax avoidance/evasion and in these circumstances the higher gross amount was beneficial as the scheme mitigated the employers NI as well as other taxes 

curtis122

When you got the role was there a rate for PAYE and a higher rate for umbrella working through an umbrella or ltd company, it's normally more as the rate has an 'uplift' so it's a more to help cover the fact you have to pay employer's NI aswell. 

keplpies

I'll have to check later.  I was originally signed up for teaching supply but they passed me over to the Health and Social care desk because they urgently need staff.  I assume I am on the same contract.  If nothing else, this issue means I'll look at my contracts in more detail from now on and research more about tax and employment.