Newbie to contracting- first pay, and seemed to have had alot taken

[biker1981]

Im new to contracting, and have been paid for 12 days work (started mid month)

I'm using a well know umbrella company, Im on a day rate of £200 a day. so £2400 for the 12 days ive worked is what was invoiced yet when Ive received my pay ive got £1488.

The payslip isnt complete available yet, but can anyone shed some light on why im paying £922?

I was originally told that with milleage allowance etc I should be gettins approx £148 a day after contributions etc. This is working out approx £122 a day.

Any advice /help appreciated.

[bless 'em all]

Have you tried asking the well-known umbrella company?

They might tell you exactly whats going on.

[biker1981]

Have you tried asking the well-known umbrella company?

They might tell you exactly whats going on.

You would think.... I called up and they cant see the payslip either yet?:

[Ticktock]

So your take home is about 68%

Out of your invoice you will have had several deductions.
Employees National Insurance
Employers National Insurance (you pay this also)
Income Tax
Their fee.

Don't forget, the more expenses you put through (travel, subsistence) the higher percentage you'll keep, as these reduce how much of your top line is subject to deductions. Umbrella companies like you to expense loads, as then they can claim a higher average retainable for their customers.

[LisaContractorUmbrella]

So your take home is about 68%

Out of your invoice you will have had several deductions.
Employees National Insurance
Employers National Insurance (you pay this also)
Income Tax
Their fee.

Don't forget, the more expenses you put through (travel, subsistence) the higher percentage you'll keep, as these reduce how much of your top line is subject to deductions. Umbrella companies like you to expense loads, as then they can claim a higher average retainable for their customers.

Umbrella companies do not like you to expense loads unless you have incurred loads of costs that can be legitimately claimed as expenses i.e. are allowable by HMR&C; encouraging contractors to claim loads of expenses that they are not entitled to claim is likely to result in the umbrella company going down the tubes following a stern talking to by HMR&C

[LisaContractorUmbrella]

Im new to contracting, and have been paid for 12 days work (started mid month)

I'm using a well know umbrella company, Im on a day rate of £200 a day. so £2400 for the 12 days ive worked is what was invoiced yet when Ive received my pay ive got £1488.

The payslip isnt complete available yet, but can anyone shed some light on why im paying £922?

I was originally told that with milleage allowance etc I should be gettins approx £148 a day after contributions etc. This is working out approx £122 a day.

Any advice /help appreciated.

The rate of £200 per day is the contract rate between the umbrella company and the agency; you work under a contract of employment with the umbrella company. Your umbrella company is obliged, by law to make payment for employer's national insurance (currently 13.8%) to HMR&C so this is deducted from the £200, as is the umbrella company's margin; your salary is the remainder and is subject to income tax and employee's national insurance contributions as with any other employment

HTH

[Wanderer]

I was originally told that with milleage allowance etc I should be gettins approx £148 a day after contributions etc. This is working out approx £122 a day.

Umbrellas are notorious for overestimating the amount you will take home from your gross contract value and a lot of people are disappointed when they find the actual take some amount as compared to the amount that the sales person quotes them.

There is a calculator here that should give you a more reliable picture though it depends on a number of things including now much money you have earned already this year which may push you into the higher rate tax and reduce the take home amount.

Take it up with them but what you have probably found out is that you pay a lot of tax when you work through an umbrella. If you are going to be contracting long term and you are outside IR35 then you should consider forming a limited company.

[Ticktock]

Umbrella companies do not like you to expense loads unless you have incurred loads of costs that can be legitimately claimed as expenses i.e. are allowable by HMR&C; encouraging contractors to claim loads of expenses that they are not entitled to claim is likely to result in the umbrella company going down the tubes following a stern talking to by HMR&C

Sorry Lisa. Yes, I meant legitimate expenses only. I did think of going back to edit, but was lazy.
But, for example, it's correct that they would prefer that you buy lunch everyday and expense the subsistence, rather than making a packed lunch, as you then retain more of the invoiced amount, and the umbrella is able to legitimately state that "on average our clients retain x amount".

[LisaContractorUmbrella]

Sorry Lisa. Yes, I meant legitimate expenses only. I did think of going back to edit, but was lazy.
But, for example, it's correct that they would prefer that you buy lunch everyday and expense the subsistence, rather than making a packed lunch, as you then retain more of the invoiced amount, and the umbrella is able to legitimately state that "on average our clients retain x amount".

No, no, no Umbrella companies cannot legitimately state an average take home pay which is any higher than any other umbrella company's (other than variances in the margin taken) based on the same circumstances. The quotes you are referring to are a marketing ploy which will cause nothing but disappointment when you receive your first payslip. We all pay through PAYE, we can only process expenses allowable by HMR&C and, as employers, we certainly have no place in trying to sway people's luncheon preferences - don't forget - you may get tax relief on the Pret sandwich but you still have to buy it in the first place. Making a lunch at home will probably cost less than a pound - buying it in Pret or Marks or similar will cost £5-£8 on which you will then get tax relief but you still out of pocket by £3-£5 more than if you had brought in lunch from home.

[LisaContractorUmbrella]

Umbrellas are notorious for overestimating the amount you will take home from your gross contract value and a lot of people are disappointed when they find the actual take some amount as compared to the amount that the sales person quotes them.

There is a calculator here that should give you a more reliable picture though it depends on a number of things including now much money you have earned already this year which may push you into the higher rate tax and reduce the take home amount.

Take it up with them but what you have probably found out is that you pay a lot of tax when you work through an umbrella. If you are going to be contracting long term and you are outside IR35 then you should consider forming a limited company.

Calculator's actually a bit misleading Wanderer - they have included annual fees from an umbrella as £1800 (£150 per month) and £1368 from an accountant (£114.00) per month. We charge £95.00 which is considerably less than the figure being used in the take home pay calculation