little help...

[planetit]

That only works if you're a permy. It's completely daft to allow that situation if you're contracting. What if you don't work that long?

Exactly the same as happens with a permie. At the end of the year you get a rebate. Remember, from a PAYE point of view you ARE a permie.

Actually my accountant once told me there is no statutory requirement to pay PAYE each month. So long as it’s paid by the end of the year. So they can’t force you to pay each month, but you will have to file nil returns each month/quarter (which to my mind is a kind of lie, since you HAVE paid a salary and SHOULD pay PAYE), and they will make life difficult for you (you will be pushed up the PAYE audit league table).

[malvolio]

OK, so you're happy to hand over a lump of your money to someone else to invest on the understanding you get it back, with a small amount of interest which ill be rather less than they have earned, at some future point?

And this is a good idea?

[MarillionFan]

Bunch of Permies

Hang on chaps you're all talking like perms.

Surely it doesnt matter if your a little behind at the start of the year, damn it we can afford it. If you cant your not contracting properly.

MF in 'Some People' Mode.

[planetit]

OK, so you're happy to hand over a lump of your money to someone else to invest on the understanding you get it back, with a small amount of interest which ill be rather less than they have earned, at some future point?

And this is a good idea?

In short - Yes

In long:-
1) You won't get interest returned. That's not how PAYE works. Suggest you read up on it.
2) the interest you will earn on the money not paid 'til year end adds up to feck all.
3) The money saved by not having a PAYE investigation adds up to a hell of a lot.

Anyhow Malvolio, I thought you were with SJD? Did they advise you to use up your basic rate allowance first before moving on the the 40% band?

[malvolio]

Sorry, I thought I knew how PAYE worked, but that was a few years back when I was writing payroll systems. Ho hum...

On my salary I don't get into the 40% band so even if SJD are assuming a whole year's income in calculating my monthly tax dedcutions to level the nett pay out, it's still at basic rate. My high rate tax comes after the year end the divis go on the SA form and I get a separate bill (which I pay with the money stashed in what is laughingly called a "high interest" account!). The umbrella quoted in the OP is not doing that, they're assuming high rate from the beginning. Ergo they are extracting a percentage of the their clients' money unnecessarily.

It is entirely logical to assume that they do so to cover their own potential liability and to even out the contractor's pay monthly - after all, you don't use a brolly if you're interested in how it all works - but I still think that in terms of who you allow to do what with your money, it's a bad approach.

[rooney]

The Original Post

The original post showed what I think is a non dividend scheme so the deduction of tax at the appropriate bands going upto the highest rate is quite correct.

[malvolio]

Details, mere details. Why spoil the argument with facts...

You're right, his effective annual salary is around the £70k mark so if he's in a non-divi paying umbrella, high rate is applicable. Also, if that is the case, he's still paying more tax than necessary, of course...