Reply to: Why am I paying Employers NI?

[lucyclarityumbrella]

ERS is 13.8% above the secondary threshold (£758.00 per month), then 2% above the Upper Earnings Limit if applicable (£4189.00 per month), all based on the reverse calculation for the taxable salary from the assignment rate.

[Protagoras]

Thanks, Hmmm I wonder what's going on - another month my income was £8700 and the employers NI was £947.31 - how did that happen if it's 0% above £4189 threshold?

It's not 0% above £4189, 'rate' is still 13.8%.

£8700 fee income gives gross salary of £7622.58

£7622.58 less £758 (Lower Earnings Limit) gives £6684.58, and 13.8% of this is £947.31

[eek]

Thanks, Hmmm I wonder what's going on - another month my income was £8700 and the employers NI was £947.31 - how did that happen if it's 0% above £4189 threshold?

Employer NI is 13.8% on everything above £175 a week.

[Olly]

I put this into my model for monthly umbrella income and the results were as follows

Gross Contract Income	£ 6,525.00
Holiday Pay	£ 188.65
LLW Salary	£ 1,792.50
Bonus Salary	£ 5,531.03
Gross Total Salary	£ 5,719.69
Apprenticeship Levy	£ 28.60
Employer NI	£ 684.71
Employee NI	£ 593.22
Umbrella Margin	£ 92.00
Total NI + Apprentice	£ 1,306.53
Bonus Pension	£ -
Total Pension	£ -

The Employer's NI calculated as follows ...

	Employer NI
	From	To	Rate	Differential	Amount	Tax
Lower Earnings Limit	£ -	£ 758.00	0.00%	0.00%	£ 5,719.69	£ -
Secondary Threshold	£ 758.00	£ 4,189.00	13.80%	13.80%	£ 4,961.69	£ 684.71
Upper Limit	£ 4,189.00		13.80%	0.00%	£ 1,530.69	£ -
						£ -
						£ 684.71

Thanks, Hmmm I wonder what's going on - another month my income was £8700 and the employers NI was £947.31 - how did that happen if it's 0% above £4189 threshold?

[eek]

PS - This has nothing to do with being 'inside' IR35 or otherwise. The calculation is the same for folks working 'outside' IR35 and being paid via an umbrella company.

It's true for anyone being paid by PAYE - it's just that if you are an employee the Employer NI side of things is hidden from you...

[Protagoras]

I'm a bit confused (for a change)
I was told on here that inside IR35 I should expect an apprenticeship levy of 0.5% and Employer's NI of 13.8% - so a total of 14.3%

PS - This has nothing to do with being 'inside' IR35 or otherwise. The calculation is the same for folks working 'outside' IR35 and being paid via an umbrella company.

[Protagoras]

I'm a bit confused (for a change)
I was told on here that inside IR35 I should expect an apprenticeship levy of 0.5% and Employer's NI of 13.8% - so a total of 14.3%
My income was £6525 with an umbrella margin of £92 leaving £6433.
The employer's NI the umbrella deducted was £684.71 and the levy £28.6
That looks like 10.6% NI not 13.8%
What am I doing wrong please?

I put this into my model for monthly umbrella income and the results were as follows

Gross Contract Income	£ 6,525.00
Holiday Pay	£ 188.65
LLW Salary	£ 1,792.50
Bonus Salary	£ 5,531.03
Gross Total Salary	£ 5,719.69
Apprenticeship Levy	£ 28.60
Employer NI	£ 684.71
Employee NI	£ 407.53
Umbrella Margin	£ 92.00
Bonus Pension	£ -
Total Pension	£ -

The Employer's NI calculated as follows ...

	Employer NI
	From	To	Rate	Differential	Amount	Tax
Lower Earnings Limit	£ -	£ 758.00	0.00%	0.00%	£ 5,719.69	£ -
Secondary Threshold	£ 758.00	£ 4,189.00	13.80%	13.80%	£ 4,961.69	£ 684.71
Upper Limit	£ 4,189.00		13.80%	0.00%	£ 1,530.69	£ -
						£ -
						£ 684.71

[eek]

I'm a bit confused (for a change)
I was told on here that inside IR35 I should expect an apprenticeship levy of 0.5% and Employer's NI of 13.8% - so a total of 14.3%
My income was £6525 with an umbrella margin of £92 leaving £6433.
The employer's NI the umbrella deducted was £684.71 and the levy £28.6
That looks like 10.6% NI not 13.8%
What am I doing wrong please?

There is an allowance of £175 a week before the 13.8% is taken off and it's also a reverse calculation as it's 13.8% of your salary and you salary is only known once the employer ni & apprenticeship levy is deducted

The end calculation (from memory looks something like)

salary=6433+(weeks*24.15)/1.143
employer NI=salary*0.138
apprenticeship levy=salary *.005

that £24.15 is a trick (and I may have it slightly wrong) to fix the employer NI allowance

[Olly]

I'm a bit confused (for a change)
I was told on here that inside IR35 I should expect an apprenticeship levy of 0.5% and Employer's NI of 13.8% - so a total of 14.3%
My income was £6525 with an umbrella margin of £92 leaving £6433.
The employer's NI the umbrella deducted was £684.71 and the levy £28.6
That looks like 10.6% NI not 13.8%
What am I doing wrong please?

[eek]

Hi all,

Sorry to jump in, but noticed the sticky thread and am in need of some advice.

Could anyone explain (in very simple terms) why when I try to calculate employers NIC I cant get the same figure as my umbrella does?

I am taking the gross pay (after margin and apprenticeship levy etc) and multiplying by 0.138 (for 21-22 tax year), but this is about a hundred pounds off what the umbrella states?

Could some help me understand what is happening here, as it seems similar for a few umbrellas.

Thanks in advance!

When you say off - do you mean they are deducting less than 13.8% or more than 13.8%

as don’t forget you don’t pay any employer no on the first £175 a week

[WTFH]

Hi all,

Sorry to jump in, but noticed the sticky thread and am in need of some advice.

Could anyone explain (in very simple terms) why when I try to calculate employers NIC I cant get the same figure as my umbrella does?

I am taking the gross pay (after margin and apprenticeship levy etc) and multiplying by 0.138 (for 21-22 tax year), but this is about a hundred pounds off what the umbrella states?

Could some help me understand what is happening here, as it seems similar for a few umbrellas.

Thanks in advance!

When you say it is about a hundred pounds out, is that based on daily, weekly, monthly or annual calculations?
Also, it's worth noting that we are currently in the 23-24 tax year if you're trying to work out using today's figures.

Rather than using words to say there's a difference, it might help if we saw numbers, or speak to the umbrella if you don't want to share actual numbers here.

[BB8]

Hi all,

Sorry to jump in, but noticed the sticky thread and am in need of some advice.

Could anyone explain (in very simple terms) why when I try to calculate employers NIC I cant get the same figure as my umbrella does?

I am taking the gross pay (after margin and apprenticeship levy etc) and multiplying by 0.138 (for 21-22 tax year), but this is about a hundred pounds off what the umbrella states?

Could some help me understand what is happening here, as it seems similar for a few umbrellas.

Thanks in advance!

[andymalory]

It's crazy that you think like that.

The agent or end client do not determine how much an umbrella charges, or if you're going via your own Ltd, bow much you pay yourself as a salary.

The agent or client will offer the amount that they are prepared to pay. That is what matters to them - how much it will cost them to get you on board. They are not your financial advisers. They do not care if you have 20 layers between you and them. They do not care if you pump a load of money into a pension. They do not care about who all takes a cut before it hits your bank.

Who takes a cut, and how much they take - those are things you should care about. It's crazy that you want to absolve yourself of any personal responsibility.

This is not about personal responsibility. I'm not talking about what contractors do once they've been paid a gross salary - i.e. through a Ltd or what I put in a pension. That is not relevant to this. For a salaried individual at £25k, they don't want or need to know that the employer actually has budgeted higher than this for their employer costs.

Why is an inside-IR35 contractor, who is employed for tax purposes, treated any differently?

[WTFH]

Its crazy to say contractors should be trying to figure out how to include other (non-worker) costs in the rates being negotiated.

In no other client-staff situation would this ever be considered reasonable, but somehow contractors and freelancers have to now think about this.

It's crazy that you think like that.

The agent or end client do not determine how much an umbrella charges, or if you're going via your own Ltd, bow much you pay yourself as a salary.

The agent or client will offer the amount that they are prepared to pay. That is what matters to them - how much it will cost them to get you on board. They are not your financial advisers. They do not care if you have 20 layers between you and them. They do not care if you pump a load of money into a pension. They do not care about who all takes a cut before it hits your bank.

Who takes a cut, and how much they take - those are things you should care about. It's crazy that you want to absolve yourself of any personal responsibility.

[andymalory]

And who are you negotiating that with?
The people that pay you, or some agency or client that pays them?

If you're not negotiating it with the people who pay money into your personal bank account, then it's up to YOU to include their part in your sums. Not anyone else.

Usually the end client or agency. Its crazy to say contractors should be trying to figure out how to include other (non-worker) costs in the rates being negotiated.

In no other client-staff situation would this ever be considered reasonable, but somehow contractors and freelancers have to now think about this.