Working via an umbrella - max possible tax saving / pension contribution

[ConcernedCitizen]

The option I am considering now is moving the contract into an umbrella company so that I can proceed with company closure (currently contracting via Ltd). The umbrella tax bill is horrendous... it's a fact. Since my pension balance is very low I thought about doing the umbrella thing and putting most of the money into pension for a short period of time until I figure it all out.

Is my understanding correct that for anything I put into pension via umbrella I will not pay any tax? I.e.: no Employer NI, no Employee NI, no income tax? So to make the numbers round: 3 months x 500pd x 20days a month = £30,000 overall invoice and all this could go into pension (after accounting for the umbrella fee :/).

[Paralytic]

You're largely correct, but you'll still pay some employers NI, apprenticeship level and maybe some level of employee taxes depending on how much you put into your pension. The Umbrella has to pay you the minimum wage and also remember you only have £40K tax-free pension allowance each year, but can carry forward the 3 previous unused years so long as you had a pension at that time.

There's plenty of threads that give more details on the above. Contact an Umbrella to get an illustration (but not one of the dodgy ones that promise you more take-home pay)

[LondonManc]

Lucy at Clarity gives really good explanations about what you can do with take home pay, pensions, etc. and is really up front about what you can and cannot do.

[ConcernedCitizen]

You're largely correct, but you'll still pay employers NI, apprenticeship level and maybe some level of employee taxes depending on how much you put into your pension. The Umbrella has to pay you the minimum wage and also remember you only have £40K tax-free pension allowance each year, but can carry forward the 3 previous unused years so long as you had a pension at that time.

There's plenty of threads that give more details on the above. Contact an Umbrella to get an illustration (but not one of the dodgy ones that promise you more take-home pay)

I had some perm roles in the past and each of them had a private pension scheme so I'm assuming this would count in terms of giving me the £40k allowance for each year (I contributed minimally).

Feels like my main question which is whether the pension is deducted before Employers NI is still unanswered... if I need to pay taxes on the minimum wage salary then that will need to be factored in but that's still paying tax of approx. £3,000 rather than £30,000 in this example.

[ConcernedCitizen]

Lucy at Clarity gives really good explanations about what you can do with take home pay, pensions, etc. and is really up front about what you can and cannot do.

Thanks - will check... as in Clarity Umbrella Ltd?

[LondonManc]

Thanks - will check... as in Clarity Umbrella Ltd?

Yeah, also as in Lucy who posts on here.

[lucyclarityumbrella]

Thanks - will check... as in Clarity Umbrella Ltd?

That'd be us

[lucyclarityumbrella]

IF the pension is done via salary sacrifice, then it reduces your taxable salary by that pension amount. Employers NI is calculated based on the taxable salary; hence you reduce one, you reduce the other; reverse umbrella payroll calculation magic

[ConcernedCitizen]

IF the pension is done via salary sacrifice, then it reduces your taxable salary by that pension amount. Employers NI is calculated based on the taxable salary; hence you reduce one, you reduce the other; reverse umbrella payroll calculation magic

Thank you for clarification. It sounds like the right solution. I will do a few more checks with the accountant to make sure it will be a sensible way forward in my situation.