Help with PAYE Tax please (Umbrella)

[sira]

I've been contracting via brolly since April. I started a gig in July (and changed brollies) and since then every payslip I've had, it seems like I'm overpaying on tax. I havent earned strong sums of money via PAYE route before so I'm finding it all very complicated and scratching my head. My brolly company (who I wont name and shame), haven't been very good at explaining my tax to me and their payslips seem extremely confusing.

I'm not even sure how to articulate it all on here, but to keep it simple & get a ballpark tax figure, I plugged in my approximate annual wage online on listentotaxman.com and it returned a net tax rate of 33%. This is what I would be paying as a permie.

On my payslips thus far, my net tax rate % has been:
August - 36%
September - 43%
October - 42%
November - 43%

Just to add colour, from April-June (in my previous contract), I was on a low day rate so the income was pretty insignificant. For the tax year 21/21, I'm scheduled to earn just shy of 6 figures (Gross) for the tax year.

I'm really confused why my net tax rate % is so high for the last few months? Am I onto something, or am I looking at this all wrong?

[hobnob]

Did you get a P45 from your old umbrella and give it to the new umbrella when you switched contracts?
Did you get a letter from HMRC with a new tax code?
Is the tax code on each payslip the same for the old/new umbrella?

Assuming that the P45 is sorted out, you have 2 options:
* Wait until the end of the year, then get a tax rebate. (This should happen automatically, but you can speed up the process by doing a SATR.)
* Notify HMRC about your new contract (and predicted income) now, so that they issue you with a new tax code.
Tax codes: Tell HMRC about a change in income - GOV.UK (www.gov.uk)

[hobnob]

Looking at your previous thread (from June), it ended with this post:

In parallel, I switched umbrella companies which took just 5 minutes. New brolly said its fine, if old P45 finish date and start of new gig date overlap. I'll be on monthly billing this time so wont be any tax or tax code issues hopefully. I never enjoy incorrect tax codes.

I suspect that the overlap between umbrella companies is related to your current issues.

[sira]

Looking at your previous thread (from June), it ended with this post:



I suspect that the overlap between umbrella companies is related to your current issues.

Did you get a P45 from your old umbrella and give it to the new umbrella when you switched contracts?
Did you get a letter from HMRC with a new tax code?
Is the tax code on each payslip the same for the old/new umbrella?

Assuming that the P45 is sorted out, you have 2 options:
* Wait until the end of the year, then get a tax rebate. (This should happen automatically, but you can speed up the process by doing a SATR.)
* Notify HMRC about your new contract (and predicted income) now, so that they issue you with a new tax code.
Tax codes: Tell HMRC about a change in income - GOV.UK (www.gov.uk)

• Yes I did get a P45
• Yes I did get a tax code (1284L)
• Tax Codes on payslip with previous and current umbrella are the same (1284L)

If I tell HMRC about my predicted income, will I get paid back on my next payslip? What tax code could they issue me, as I thought 1284L was the correct one, having spoken to them a few months ago.

[eek]

And what is your daily rate

assuming it’s £400 a day so £8000 or so a month the figures look like

Monthly Income	£8,000.00
Employer National Insurance	£864.98
Employment Tax	£35.02
Employee National Insurance	£463.36
Employee Tax	£1,754.46
Total All Tax	£3,117.83
Margin	£95.00

Total Net Income

£4,787.17

so 43% lost in tax sounds about right.

also given you’ve changed are they doing holiday pay.

[sira]

Looking at your previous thread (from June), it ended with this post:



I suspect that the overlap between umbrella companies is related to your current issues.

And what is your daily rate

assuming it’s £400 a day so £8000 or so a month the figures look like

Monthly Income	£8,000.00
Employer National Insurance	£864.98
Employment Tax	£35.02
Employee National Insurance	£463.36
Employee Tax	£1,754.46
Total All Tax	£3,117.83
Margin	£95.00

Total Net Income

£4,787.17

so 43% lost in tax sounds about right.

also given you’ve changed are they doing holiday pay.

Thanks. The next question being, if you punch in £96,000 into a tax calculator (e.g. listentotaxman), the net tax rate comes out at 33%. Whereas you're saying 40% is the correct figure. Where does this 7% discrepancy stem from? And why do you say my tax figures look correct at circa 42-43% tax rate?

[eek]

Thanks. The next question being, if you punch in £96,000 into a tax calculator (e.g. listentotaxman), the net tax rate comes out at 33%. Whereas you're saying 38% is the correct figure. Where does this 5% discrepancy stem from? And why do you say my tax figures look correct at circa 42-43% tax rate?

Because listen to the taxman works on PAYE salary.

and umbrella assignment fees also contain the employer costs (holiday pay, employer NI and apprenticeship levy) because agents are cowboys and the rates they advertise are (albeit technically illegal) are designed to look better than they actually are by including things they really shouldn’t.

Were all agencies 100% honest all umbrella contracts would be advertised using the PAYE rate but because any agency doing that won’t get any applicants, all agencies now advertise using umbrella assignment rate (I.e. what the umbrella will receive for every day you work but that isn’t what is available for the umbrella to pay you for the work).

[sira]

Because listen to the taxman works on PAYE salary.

and umbrella assignment fees also contain the employer costs (holiday pay, employer NI and apprenticeship levy) because agents are cowboys and the rates they advertise are (albeit technically illegal) are designed to look better than they actually are by including things they really shouldn’t.

Were all agencies 100% honest all umbrella contracts would be advertised using the PAYE rate but because any agency doing that won’t get any applicants, all agencies now advertise using umbrella assignment rate (I.e. what the umbrella will receive for every day you work but that isn’t what is available for the umbrella to pay you for the work).

So that extra 2-3% is going into the brollies pocket?

Is there anyone I speak to, to get impartial advice on my payslips? If i call HMRC can they look into whether im paying the right amount of tax?

[Fred Bloggs]

So that extra 2-3% is going into the brollies pocket?

Is there anyone I speak to, to get impartial advice on my payslips? If i call HMRC can they look into whether im paying the right amount of tax?

It's your responsibility to pay the correct amount of tax. I think you should complete an satr in April whether you are asked to or not. Your tax will then be sorted out for you.

[Lance]

I find it staggering how many people cannot get the most basic tax concepts of being an employee, but until recently were directors of LTD. companies. Maybe there should be a basic test before someone can become a director?