Newbie to contracting - NIS and tax for migrant

[LisaContractorUmbrella]

Oh.. I should have mentioned it before.

I have decided to take umbrella company route.

Ok that's easy then When you work with an umbrella company you will be their employee which means that your tax and national insurance contributions will be deducted at source i.e. they will be paid directly to HMRC and you will paid a salary. The umbrella company will have a contract with the recruitment agency/client - they will raise an invoice for your days worked which will then be paid by the agency/client. The umbrella company then has a statutory obligation to pay employer's national insurance (which is 13.8% after allowances) they will then deduct their margin and the balance is your salary which is subject to income tax and employees national insurance. Income tax will be deducted according to your tax code which will be allocated to you by HMRC. Your tax code denotes how much you can earn before you pay income tax which is then calculated in bands - income up to £32010 will be taxed at 20%, income between £32011 and £150,000 will be taxed at 40% and anything above that at 45%. If your earnings exceed £100,000 you should be aware that your tax free allowance will reduce by £1 for every £2 you earn over that amount. Employee's national insurance is calculated at 12% over the weekly and monthly thresholds which are £148 per week or £641 per month.

PAYE is cumulative which means that your tax free allowance is split over 52 weeks or 12 months and applied to your earnings in each payroll period; if you are not paid in any period the tax free allowance will be carried forward and applied when you are next paid along with the tax free allowance for that period.

This calculator will enable you to check what your earnings would be for a week or a month based on your daily rate: Umbrella Company PAYE Calculator | Contractor Umbrella

HTH

[kedark]

How will you be working? Will it be through an umbrella company, through a Ltd Company, as a sole trader, paid direct by a recruitment agency?? Without this information it's difficult to know how to advise you

Oh.. I should have mentioned it before.

I have decided to take umbrella company route.

[DirtyDog]

1) The tax is calculated based on estimated earning over the year considering same daily rate.
It is possible that I might leave UK in between financial year. Will I be able to claim tax return in that scenario?

Yes. If you overpay your tax, then you reclaim it.

2) The NIS contribution seems to be aimed towards pension fund. As an migrant I would not hold any pension benefit. Do I still need to pay towards NIS? (may be I do not understand purpose of NIS completely)

The level of NICs due depends on how you operate your business - sole trader, umbrella, Ltd company, PAYE employee of agency, fixed-term contract etc. etc. Without knowing what you are doing, no-one can accurately advise you.

I'd recommend reading the First Timers (and other) guides on the right hand side, as well as looking at other websites for guides for the new contractor.

[LisaContractorUmbrella]

How will you be working? Will it be through an umbrella company, through a Ltd Company, as a sole trader, paid direct by a recruitment agency?? Without this information it's difficult to know how to advise you

[stek]

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[kedark]

Hi All,

I have recently arrived in UK and searching an IT contract.
I am trying to understand how much NIS and tax I will have to pay according to tax laws.

I could find tax calculator online which gives me my tax and NIS contribution according to daily rate.
however, I have few questions which I couldn't find online.

1) The tax is calculated based on estimated earning over the year considering same daily rate.
It is possible that I might leave UK in between financial year. Will I be able to claim tax return in that scenario?

2) The NIS contribution seems to be aimed towards pension fund. As an migrant I would not hold any pension benefit. Do I still need to pay towards NIS? (may be I do not understand purpose of NIS completely)

Thanks in advance.