Just started contracting. On my first payslip the tax and employee NI looks really low. Looks like they've only taxed me on min wage and the rest is discretionary profit sharing bonus. Is this normal for umbrella companies?
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Discretionary profit sharing bonus
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It depends what you mean by 'umbrella companies'. A standard PAYE umbrella company will give you a return of around 65% as they deduct tax and NI (and pass that money on to the tax man).
It sound like you've signed up to a dodgy tax avoidance scheme that simply has 'umbrella' in it's title."I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
- Voltaire/Benjamin Franklin/Anne Frank... -
It's not unusual for an umbrella company to pay a combination of living wage (or minimum wage) and bonus, in fact it's the most common contract structure. What's wrong here is that you appear to be only being taxed on the minimum wage part of your earnings - there's no way that the bonus element should not be taxable. Have you signed a contract of employment with the company? Does that give any details of the pay/tax structure?Comment
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