Smaller April payment tax allowance?

[cwir]

Hi all,

I'm confused about my recent payment. I'm a contractor working through umbrella company. After first two "weaker" months this year (holidays etc), I worked full-speed in March. I took any possible overtime, missed only half day and generally I was looking forward very much to my payment this month. I've been working on this contract for 8 months now so more or less I know how much to expect based on my timesheet, and it should have been around £600 more. I asked my umbrella company and they "explained" that this payment was calculated in the new tax year (I submitted my timesheet on 31.03) and therefore it received only 1 week tax allowance (relief). And they said that it will adjust in the next few payments.

Can this be true? Can my payment for March be affected by the fact that it has been calculated after the new tax year begun, and because of that it only got 1 week worth of tax relief? I may be using wrong terms here as I'm trying to recreate what I understood but that was more or less the main cause. I usually get paid around mid-month after all middle-man process my payment (bleh)..

And if this is right, can it be that different?? I mean £600 pounds less?? I like paying taxes as much as the next guy but this is a little bit ridiculous. On the invoice the difference between the amount on top (paid by the agency) and the amount I get is HALF. Like I'd be paying 50% tax (usually I end up with 'only' around 35% tax).. I can understand it beeing normal but I'm googling for hours now and can't find similar case. Also my friends at work (although through different agencies and umbrellas) didn't get less than expected..

Can someone please help me with this? Is this normal or is someone BSing here..?

Thanks!

[LisaContractorUmbrella]

It's always difficult to answer this type of question without seeing all the figures but it sounds as though your payment for one month's work has been processed as a weekly payment through payroll which means your tax free allowance would be 1/52nd rather than 1/12th of the annual amount.

The fact that it is the start of the new tax year should have no bearing on this - if the payment being processed is for 1 month's work it should have been processed as monthly and not weekly.

HTH

[Beefy198]

Can this be true? Can my payment for March be affected by the fact that it has been calculated after the new tax year begun, and because of that it only got 1 week worth of tax relief?

As they made payment in the new tax year then it doesn't matter when you did the work, it would be taxed in the 2009/10 tax year.

I think Lisa may be right, they've paid you several weeks in one (although Lisa are you trying to say that under Contractor Umbrella you can be paid/taxed weekly and then suddenly be paid/taxed as monthly, then presumably go back to being weekly again? I didn't think it worked like that, but then I'm not an expert).

I think they are right though, you will in effect 'get it back' as a rebate in following weeks. Think of it as a savings scheme.....

[EchoSierra]

I think Lisa is right.

It sounds like you submitted your timesheet on 31/03/09. The Umbrella company then processed in the first week of financial year 2009-10. And then paid you around mid-month as you said.

I'm only guessing as I don't have all the details.

As you've probably found out, the tax allowance (relief) for financial year 2009-10 is £6,475. One week of relief is only £124.52 so you'd be getting taxed on everything else (@20% and possibly 40%)!! At least one month tax relief is £539.58...
Hopefully if you keep to your schedule of timesheet submission you'll get the full 4 weeks relief for your next pay.

This is a good website for figuring out what you need to pay:
http://listentotaxman.com/

[cwir]

Thanks for your input guys.

I've been doing some research and talking to my umbrella company and it is as EchoSierra says. I've been taxed with only 2 weeks relief (it was calculated on 14.04) for icome earned during 5 tax weeks. My next and following payments will go back to full "week by week" reliefs but the blow here is that the 3 weeks worth of relief I 'lost' is something I can claim back as a tax return after this tax year ends. So I'm out of £600 for a year

Time to loose the middle-men...