How are you currently taxed by umbrella companies

Umbrella companies can make it more easy to take care of your tax for a number of your contracts. When you use an umbrella company,you’re paid via the PAYE system,like employees are. But how does this actually work,and how can the companies tax you? Here is an explanation of how you are taxed by umbrella companies and what that means for you.

Tax Through PAYE

If you are not already aware,PAYE stands for pay as you get. So when you use an umbrella company,you pay your tax as you earn instead of paying your tax in a lump sum following the tax season is over. Throughout the system,you may pay your income tax and National Insurance contributions,assuming that you are earning enough. You will have a tax code which indicates to HMRC how much tax you should be paying. The thresholds for paying your taxes and tax bands can change annually,so it is always important to stay current.

Presently (2018),you’ll pay National Insurance contributions at 12% on earnings above #162 a week and 2 percent above #892 a week. The personal allowance for income tax is #11,850 with 20% paid on everything after up to #34,500,and 40% from #34,500 to #150,000.

Umbrella Company Expenses

Another aspect to consider is that some expenses that are allowable can be claimed by you. Chargeable expenses are those reimbursed by your customer or recruitment agency. Other expenses are non-chargeable,and the umbrella company will manage them when calculating your pay. Allowable expenses will be deducted from your income so you don’t have to pay tax on them. If your contract with your customer is deemed to be under the Supervision,Direction and Control of your customer,you can not claim travel and subsistence expenses.

Calculating Your Pay

Your pay will be calculated after you have submitted timesheets into the umbrella company and recruitment agency or end customer. In addition to your taxes,the umbrella company will even minus the commission to the company and any other deductions,such as holiday and pension contributions pay.

Payslips

Your umbrella company should send you a payslip,which details any deductions,including taxes. At the end of the tax season,they should also give you a P60 for your records also.

What About Umbrella Companies That Promise Pay?

Some umbrella companies will tell you that you could keep most your pay (up to 95 percent) and stillbe tax-compliant. However guidance from HMRC says that this is a warning sign for businesses. You should also watch out for only some of your income going through PAYE, being paid using a loan,credit or investment that the company says isn’t subject to tax,and your payments. These could all be signs that the company isn’t paying your taxes so it is important to watch out for them.

Umbrella businesses deal with your tax for you through PAYE soyou don’t need to. You might pay a tax,but you also receive the benefits of being an employee.

visit site

Leave a Reply

Your email address will not be published. Required fields are marked *