Umbrella calculations and why they differ!

[cojak]

Thanks Lucy - I was thinking of something on the "what to watch out for" to prevent new contractors being tempted down the dark path.

That kind of info should go here http://forums.contractoruk.com/showthread.php?t=118859

[lucyclarityumbrella]

That kind of info should go here PS & IR35: Choosing a legitimate Umbrella

Thanks Cojak. Leave it with me and I will see what I can put together - we have seen some brilliant ones recently!

[the heron]

No genuine advice here as it's full of HMRC employees pretending to be contractors

Just look at the amount of posts per profile it says it all

[northernladuk]

No genuine advice here as it's full of HMRC employees pretending to be contractors

Just look at the amount of posts per profile it says it all

Because post count proves that!

6

[lucyclarityumbrella]

Just look at the amount of posts per profile it says it all

Really

[lucyclarityumbrella]

Because post count proves that!

6

Your stuffed then NorthernLad looking at the amount of posts! How was life with the revenue???

[northernladuk]

Your stuffed then NorthernLad looking at the amount of posts! How was life with the revenue???

Making a mint out of these suckers asking for advice and hunting them down when they clearly don't have a clue thank you!!!

[lucyclarityumbrella]

I thought it may be worth resurecting this a little with the queries that are currently appearing on here!

Let's make one thing clear, HMRC set the taxes so there is very little difference any compliant umbrella company can make to affect the take home, however when you are looking at illustrations these are the things you need to consider:

1. The margin - this may make minimal difference
2. Tax Code - usually on a 1250L W1/M1 tax code
3. Expenses - some still assume expenses but be aware that as IR35 deems you an employee the likelihood of being able to claim these is slim (as confrimed by HMRC) as they will assume you are under Supervision, Direction & Control.
4. Period - look at the days / weeks that are being assumed in the calculation. If a company is quoting based on you working 52 weeks of the year, then your take home is going to be higher. Ask for a more realistic quote!
5. Pension - most won't quote with pension unless requested, however it is worth looking out to see if that has been included.
6. Holiday Pay - most will not show or show rolled up holiday (ie you have no holiday pay when on leave), if you do want to accrue this then ask for that to be shown on the illustration.

This probably covers most things, but if there is a large take home difference then be very careful. For a 40% tax payer, the average take home from an umbrella (with no pension) is between 52-56%.

Hope this is of use

[SDR]

Is Employers' NI calculated differently for an umbrella over the usual method of 0% to ST and then 13.8% over and above? The calculator on the Clarity website for £10,000 of monthly income is £1,108.64 but on Listentotaxman is £1,280.73 using 1250L M1 tax code. Thanks!

[lucyclarityumbrella]

Is Employers' NI calculated differently for an umbrella over the usual method of 0% to ST and then 13.8% over and above? The calculator on the Clarity website for £10,000 of monthly income is £1,108.64 but on Listentotaxman is £1,280.73 using 1250L M1 tax code. Thanks!

Hi SDR,
Clarity does look at a 1250L M1 figure so one tax free allowance. However I cannot see that this can be taken into account on the Listentotaxman site, therefore will predict earnings for that site on £120k annualised earnings ie removing substantial tax free allowance in the figures.
The 1250L M1 looks at an isolated monthly figure rather than annualised.