Umbrella calculations and why they differ!

[SDR]

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.

Thanks Lucy. So earnings are annualised before calculating employers' NI? It's not as simple as 13.8% of £10,000 less £719 allowance and any other deductions (not sure if there any)? I'm just curious how the Clarity calculator comes up with a figure of £1,108.64 from £10,000 gross monthly pay...

[lucyclarityumbrella]

I'm just curious how the Clarity calculator comes up with a figure of £1,108.64 from £10,000 gross monthly pay...

No, Employers NI is calculated based on taxable salary not your gross contract rate, and to get to your taxable salary you need to know the Employers NI, so it is a bit of "payroll magic" to do the reverse calculation to come up with the end figures!

[Drei]

Hi Lucy, just a quick question regarding the Employers' NI as I never got my head around the way it is calculated.


I worked through PayStream for a few months before losing my contract due to Covid. When I put in my salary on the listentotaxman website it shows that the PayStream charged me £1900 extra for Employer NI. When I questioned PayStream they said that the Employer NI is a monthly allowance and NOT a yearly one, therefore if you earn £6000 a month and only work 3 months, you will pay the same Employer NI as if earning £72k. Also there is no way to claim this back or to offset it...

Does that sound correct?


Happy to send you my payslips from them, tell me if your figures are the same. I might as well terminate my contract with them in case I need to claim Universal Credits and work through you guys in the future.

[northernladuk]

No, Employers NI is calculated based on taxable salary not your gross contract rate, and to get to your taxable salary you need to know the Employers NI, so it is a bit of "payroll magic" to do the reverse calculation to come up with the end figures!

Could you explain what Employers NI is please and give an example?

[eek]

Hi Lucy, just a quick question regarding the Employers' NI as I never got my head around the way it is calculated.


I worked through PayStream for a few months before losing my contract due to Covid. When I put in my salary on the listentotaxman website it shows that the PayStream charged me £1900 extra for Employer NI. When I questioned PayStream they said that the Employer NI is a monthly allowance and NOT a yearly one, therefore if you earn £6000 a month and only work 3 months, you will pay the same Employer NI as if earning £72k. Also there is no way to claim this back or to offset it...

Does that sound correct?


Happy to send you my payslips from them, tell me if your figures are the same. I might as well terminate my contract with them in case I need to claim Universal Credits and work through you guys in the future.

That's right - except for a few exceptions (such as company directors) NI allowances are periodic (week or month) rather than annual.

[Drei]

That's right - except for a few exceptions (such as company directors) NI allowances are periodic (week or month) rather than annual.

The easy way is with numbers. I got £22814.36 salary for the 4 months I worked and paid £2531.99 Employer NI. According to listentotaxman the Employer NI should have been £1935.64. So I just gave the taxman £595.35 for the privilege of taking a IR35 role)
Paid enough in TAX and personal NI, tax I should get back in April, not sure if I can claim-back the Personal NI.

I rather give £600 to someone that is struggling this year, Xmas presents for a struggling single mum or something. The government is just going to throw it away inside their black hole. Working for the public sector the last 2 years... made me extremely bitter when it comes to taxes. Seeing how much of our money they waste is unbelievable. I really don't want to give them a penny more than I have to.

[lucyclarityumbrella]

The easy way is with numbers. I got £22814.36 salary for the 4 months I worked and paid £2531.99 Employer NI. According to listentotaxman the Employer NI should have been £1935.64. So I just gave the taxman £595.35 for the privilege of taking a IR35 role)

Apologies it's taken me a while to come back to you, but I think I have figured out the difference for you, and it all comes back to the rate versus the taxable salary. Looking at your figures the £22,814.36 is the invoice value (apologies if I am wrong), if I split this by the 4 months, the invoice per month is £5,703.59, which gives a monthly Employers NI of £588.33 (over 4 months £2,353.32). So the taxable salary you should be entering into listentothetaxman should be as follows:

£5703.59 less Ers NI, less Levy, less umbrella margin = £5,295.28 per month

If you place this on listentothetaxman, the Employers NI is £629.69 giving you around £2,518.76 per 4 months in ERs. The difference is probably down to rounding of figures along the way, but hate to break the news but what has been accounted for is correct

HTHs