Potentially going PAYE (short term) - rate breakdown

[KinooOrKinog]

I am also very surprised that people are even considering going permanent or Umbrella. I am a contractor because i don't like being tied into a company's culture (which mostly in all companies are a shambles anyway) and then there is the politics and the whole lot which most of you are already aware of, probably dealt with.

I would never go on payroll. Full Stop.

Probably because most people have mortgages & bills to pay. Never say never.

[messymess]

Bit of both. Good recruiters should understand the various engagement types and how that translates to net pay - I'm doing a LOT of training around this at the moment. But inside IR35 wasn't really a thing before this change - lots of agencies offered umbrella or limited, both the same gross rate with another entity doing deduction calcs. The requirement for KIDS (Key information Document sheet - snazzy, I know) only comes in from April and it's only for new contracts after April. So technically they don't have to give you that info now (though they absolutely should)

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE.

I had a meeting last week with the current client and I was told that their working practices have been determined as "inside IR35". A review took place by a 3rd party IR35 reviewers.

I was asked if I wanted to go permanent with them but they don't pay very well. Like many others on this forum, I was asked if I would consider going Umbrella and I told them I can consider that option but not for the same day rate(to be fair it will be until I find my next outside IR35 gig). They are considering speaking to the agency if they can look at increasing my day rate.

I am wondering if the "freelancer work" will shrink post-April in the UK? I am also very surprised that people are even considering going permanent or Umbrella. I am a contractor because i don't like being tied into a company's culture (which mostly in all companies are a shambles anyway) and then there is the politics and the whole lot which most of you are already aware of, probably dealt with.

I would never go on payroll. Full Stop.

[youngguy]

Crikey, that's a lot of similar but slightly different options and agents will almost certainly mix many of these elements/definitions up.

Bring on the KIDS.

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

[ComplianceLady]

Some I have seen today:-

Pay Rate: £500.00 (Inside IR35)
PAYE £372.50 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate to Candidate: £550 (Inside IR35)
PAYE £409.37 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate: £550 (Inside IR35)
PAYE rate: £410 per day + 12.07% accrued holiday + 3% pension contribution

On the holiday rate varying this will be based on AWR - if a perm equiv employee gets more than the statutory minimum (28 days incl Bank Hols on a 5 days week or 12.069%) the a contractor from the 13th week has to get the equiv % accrued. Many clients/agencies will match this from day 1 to save the admin.

[ComplianceLady]

Hello

An agency has a job advertised for 6 months £500 a day - Inside IR35. Prior to applying, I wanted to know the exact breakdown of this deductions and NET PAY. I was told this was not possible and to seek financial guidance. Is this just lazy agency work or are they within their rights?

Bit of both. Good recruiters should understand the various engagement types and how that translates to net pay - I'm doing a LOT of training around this at the moment. But inside IR35 wasn't really a thing before this change - lots of agencies offered umbrella or limited, both the same gross rate with another entity doing deduction calcs. The requirement for KIDS (Key information Document sheet - snazzy, I know) only comes in from April and it's only for new contracts after April. So technically they don't have to give you that info now (though they absolutely should)

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE.

[eek]

Exactly, it's not entirely clear! Will be interesting to see how different agencies present rates.

Correctly should look something like

Umbrella: £500.00 (Inside IR35)
PAYE £372.50 per day + 14.54% accrued holiday + 3% pension contribution

[youngguy]

Exactly, it's not entirely clear! Will be interesting to see how different agencies present rates.

Are the paye rate before tax and ni?


Sent from my iPhone using Contractor UK Forum

[Kanaiya]

I think holiday is optional or you can claim back end of the year or when the contract ends.


Sent from my iPhone using Contractor UK Forum

Are the paye rate before tax and ni?


Sent from my iPhone using Contractor UK Forum

[Kanaiya]

Some I have seen today:-

Pay Rate: £500.00 (Inside IR35)
PAYE £372.50 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate to Candidate: £550 (Inside IR35)
PAYE £409.37 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate: £550 (Inside IR35)
PAYE rate: £410 per day + 12.07% accrued holiday + 3% pension contribution

I think holiday is optional or you can claim back end of the year or when the contract ends.


Sent from my iPhone using Contractor UK Forum

[youngguy]

Some I have seen today:-

Pay Rate: £500.00 (Inside IR35)
PAYE £372.50 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate to Candidate: £550 (Inside IR35)
PAYE £409.37 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate: £550 (Inside IR35)
PAYE rate: £410 per day + 12.07% accrued holiday + 3% pension contribution