Umbrella Company (Inside IR35) - Take Home Pay Calculator

ShowMeTheDough

Is anyone able to provide an online link to an accurate take home pay calculator for those working under an Umbrella company (inside IR35) that takes into account both student loan deductions as well as salary sacrifice pension contributions?

I am not convinced by my current Umbrella company's payslips and would like to do a sense check online, but am unable to find a calculator that includes for both SL deductions and pension.

As an added bonus, if the calculator also takes into account the increased National Insurance contributions coming into play in the new tax year that would be even better, but I won't push my luck! 

Any help greatly received. 

Thanks. 

Dazed_and_C0nfused

Do you really need the salary sacrifice element?

With pension contributions salary sacrifice simply means you are agreeing to a lower salary in return for your employer contributing more to your pension.  That's why there is no pension tax relief added as they are employer contributions.

So say you are on £40k and sacrifice £5k that just means your earnings are £35k.  As simple as that.

https://moneyweek.com/merryns-blog/student-loans-yet-another-reason-they-wont-ever-be-repaid

ShowMeTheDough

Dazed_and_C0nfused said:

Do you really need the salary sacrifice element?

With pension contributions salary sacrifice simply means you are agreeing to a lower salary in return for your employer contributing more to your pension.  That's why there is no pension tax relief added as they are employer contributions.

So say you are on £40k and sacrifice £5k that just means your earnings are £35k.  As simple as that.

https://moneyweek.com/merryns-blog/student-loans-yet-another-reason-they-wont-ever-be-repaid

It's a bit different when working as a contractor via an Umbrella company, as the 'employer contributions' are essentially made by the employee (as well as the employee contributions, of course). The overall Salary Sacrifice deduction is split across the two, and as such it's not as straightforward as reducing the gross earnings by x% and working it out from there. 

I am paid weekly and earn a day rate as opposed to an annual salary, so want to know if my weekly pay is correct with the relevant deductions taken into account. There are many Umbrella company pay calculators online, but I cannot find any that account for both pension contributions and SL payments, both of which heavily affect the bottom line. 

Regarding the Money Week article you posted - I am unable to access that without registering, so am not sure what that says. 

Grumpy_chap

You may be over-analysing this.

How did you determine the amount of pension contribution?  As a fixed amount, or as residual?

The way the calculation is done is along the following lines:
Assume you earn £1k per week
Assume you make £200 pension contribution (ers & ees total)
Put £800 into the online calculators.  Quite a few allow for student loan estimates.
The only time that would not work would be if you impinged on the minimum wage constraint for salary.

Alternatively, most UCs will provide a calculation with salary sacrifice pension contributions very quickly if you call them up as a potential user of their service.

ShowMeTheDough

Grumpy_chap said:

You may be over-analysing this.

How did you determine the amount of pension contribution?  As a fixed amount, or as residual?

The way the calculation is done is along the following lines:
Assume you earn £1k per week
Assume you make £200 pension contribution (ers & ees total)
Put £800 into the online calculators.  Quite a few allow for student loan estimates.
The only time that would not work would be if you impinged on the minimum wage constraint for salary.

Alternatively, most UCs will provide a calculation with salary sacrifice pension contributions very quickly if you call them up as a potential user of their service.

The pension contribution is 10%, which I opted for, however - 

- I cannot just reduce the total payment made by the client by 10%, as this amount is subject to Employer's NI (which I am liable for) and the Umbrella company fee. The 10% is essentially calculated based on the employee gross salary, but to get this number I want to ensure the correct employer's NI has been deducted first. 

Point taken on calling up another UC, thanks - but in the first instance I wanted to see if there were any with comprehensive calculators online that can account for common deductions such as SS and SL. I am surprised they are not a standard provision on all UC's websites to be honest.

Do you have a link to an Umbrella calculator that has at least got student loan deductions please? I'm perhaps not looking hard enough! 

Thanks. 

Grumpy_chap

The pension is 10% of what?
Gross from the Client?
Salary?

Simplest is 10% of gross:
Earn £1k per week.
£100 to pension
£20 UC margin

£880 is the total that is reverse calculated to get NI (employer and employee), apprentice levy, holiday pay retention, student loan.
What is left over is then your take home.

ShowMeTheDough

Grumpy_chap said:

The pension is 10% of what?
Gross from the Client?
Salary?

Simplest is 10% of gross:
Earn £1k per week.
£100 to pension
£20 UC margin

£880 is the total that is reverse calculated to get NI (employer and employee), apprentice levy, holiday pay retention, student loan.
What is left over is then your take home.

As above - the 10% is of the employee gross salary, which is equal to gross from client less employer's NI less UC margin.

You mentioned there are quite a few UC calculators that allow for SL deductions, are you able to provide a link to one please? 

Sandtree

Dazed_and_C0nfused said:

With pension contributions salary sacrifice simply means you are agreeing to a lower salary in return for your employer contributing more to your pension. 

You aren't remembering how Umbrellas work... OP as secured a job say paying £500 per day, so at the end of the week £2,500 is passed to the Umbrella and that money has to cover everything...

Employers NI
Holiday Pay
Sick Pay
Umbrella's operational cost/profit margin
Apprentice Levy
Pension contribution
Employee NI
Income Tax
Salary

The contract with the umbrella typically says they are paid NMW plus a bonus which is the net of £2,500 - expenses - NMW - additional taxes/NI on the bonus.

If the "employer" (aka Umbrella) contributes more it just means more is taken from the £2,500 before calculating the bonus for the week.


To the OP... all online calculators make a bunch of assumptions and if you are earning over £100,000 then not all will consider the erosion of the tax free allowance. Most umbrellas can do much more accurate calculations over the phone/by email but still a few have dodgy tactics... personally would contact a couple of alternative umbrellas and as their calc then take the lowest one (unless there is a major difference in their fee)

ShowMeTheDough

Sandtree said:

Dazed_and_C0nfused said:

With pension contributions salary sacrifice simply means you are agreeing to a lower salary in return for your employer contributing more to your pension. 

You aren't remembering how Umbrellas work... OP as secured a job say paying £500 per day, so at the end of the week £2,500 is passed to the Umbrella and that money has to cover everything...

Employers NI
Holiday Pay
Sick Pay
Umbrella's operational cost/profit margin
Apprentice Levy
Pension contribution
Employee NI
Income Tax
Salary

The contract with the umbrella typically says they are paid NMW plus a bonus which is the net of £2,500 - expenses - NMW - additional taxes/NI on the bonus.

If the "employer" (aka Umbrella) contributes more it just means more is taken from the £2,500 before calculating the bonus for the week.


To the OP... all online calculators make a bunch of assumptions and if you are earning over £100,000 then not all will consider the erosion of the tax free allowance. Most umbrellas can do much more accurate calculations over the phone/by email but still a few have dodgy tactics... personally would contact a couple of alternative umbrellas and as their calc then take the lowest one (unless there is a major difference in their fee)

You are correct - in a nutshell, the sum paid by the client each week covers everything. From a payment POV I essentially am my own employer. Hence why the calculation is not straightforward! 

I will no doubt end up contacting some other companies as suggested. Again, I am somewhat surprised that an accurate calculator is not a standard offering on each of their websites, but then again, if indeed some of these are 'dodgy', perhaps they are not willing to disclose their calculations publicly!

Thanks for your input. 

Sandtree

ShowMeTheDough said:
I will no doubt end up contacting some other companies as suggested. Again, I am somewhat surprised that an accurate calculator is not a standard offering on each of their websites, but then again, if indeed some of these are 'dodgy', perhaps they are not willing to disclose their calculations publicly!

In reality the only difference between umbrellas in relation to take home pay is their fee and ancillary benefits are rarely worth the time it takes to listen to the sales person. It may not be too surprising therefore that some are "optimistic" in the calcs as its really a race to the bottom in fees.

ShowMeTheDough

Sandtree said:

ShowMeTheDough said:
I will no doubt end up contacting some other companies as suggested. Again, I am somewhat surprised that an accurate calculator is not a standard offering on each of their websites, but then again, if indeed some of these are 'dodgy', perhaps they are not willing to disclose their calculations publicly!

In reality the only difference between umbrellas in relation to take home pay is their fee and ancillary benefits are rarely worth the time it takes to listen to the sales person. It may not be too surprising therefore that some are "optimistic" in the calcs as its really a race to the bottom in fees.

Absolutely. Ultimately, required deductions such as tax, NI (employer and employee), student loan and so on are fixed so there should be no difference between UCs other than their fee (and 'benefits'). 

This is precisely what I'd like to check; whether my current company are deducting correctly, as I am not convinced.