4 on / 4 off calculations help please

NannaH

Husband has just started contracting work on a temp basis until mid September and we are trying to work out the figures.
He is being paid £34 an hour for 12 hour shifts on a 4 on / 4 off basis via an umbrella company. 
I work that out as a yearly salary of £74,460, is that right?  

 Would he have to earn above £50k before starting to pay higher rate tax?  If he does the full 12 sets he will earn £19500 ish. 

Also, He’s just had his first payslip for a set of 4 x 12 hour shifts,  he’s been taxed £325 on taxable pay of £1417.36 and NI of £117 ( he also has to pay employers NI of £187 and a £27 fee to the umbrella co. which brings his top line down). 

So it seems he’s paid tax on the whole amount?  Is that emergency tax and if so,  how much should it be on ‘normal’ tax?  His code is 1257X. 

 He’s had no other earnings this tax year as he’s been doing a self funded gas training course in order to go self employed but now he has a gap until the final exam hence the temp job. 

Many thanks if you can give some insight. 

Dazed_and_C0nfused

1257X isn't a valid tax code.

1257L is the emergency tax code and the X signifies that it's being used on a non cumulative basis.

What option did he choose on the new starter declaration and has he given that back to his employer?

zagfles

So he's paid weekly by the looks of it. The 1257X tax code is non cumulative, so what happened earlier in the year is irrelavent. He's getting (approx) 12579/52 tax free, then the next 37700/52 taxed at 20%, and the rest taxed at 40%. That works out to £325.

The tax code may be sorted by next payslip so it's cumulative accounting for having no income earlier in the year, and he'll get a refund in the next pay, but if it isn't get onto HMRC to sort it out.

NannaH

Yes, it’s 1257L X.
So he is paying a portion of 40% tax then?   That’s why the £325 threw me.  

He does also owe about £500 in tax ( he over claimed married allowance for 2 years apparently) so if he is overpaying tax then it should balance things out.  

As an aside,  are you taxed before NI is taken into account?  

zagfles

NannaH said:

Yes, it’s 1257L X.
So he is paying a portion of 40% tax then?   That’s why the £325 threw me.  

He does also owe about £500 in tax ( he over claimed married allowance for 2 years apparently) so if he is overpaying tax then it should balance things out.  

As an aside,  are you taxed before NI is taken into account?  

Yes, tax and NI apply to gross income (but after the employer NI is taken off)

So NI is charged at 13.25% on weekly pay between £190 and £967 then 3.25% over that. Makes £117. NI is always on a pay period basis, unlike tax which is on an annual basis.

NannaH

As it’s his first time doing contract work, it was a bit of a shock to him to have to pay 2 lots of NI ( an extra £187 per ‘week’ )  I suppose that’s why the hourly agency rate is so good . 

I doubt he’ll earn enough between Sept and March when self employed to be liable for 40% tax but if he does then it’s a nice ‘problem’ to have,   although his 1st year’s expenses should help with that.   Outrageous that he can’t have the cost of his £5k training course as an expense though!