Umbrella Taxes and Deductions

Umbrella Company Taxes and Deductions

Taxes

All Umbrella Companies should pay their employees through what is known as Pay As You Earn Taxes (PAYE) and your tax contribution is deducted, according to your tax code, each time that you are paid. Your taxable income will be reduced when you claim expenses and the Inland Revenue dictates what expenses you can claim and not Sprite. Tax is deducted at the rate of 20%, 40% depending upon your weekly earnings.  Further information about current tax bandings can be found here.

National Insurances (NI)

There are two classes of National Insurance, Employers NI and Employees NI, and both will be deducted from your overall agency receipts when working through an umbrella company however only Employees NI will be deducted from your gross pay.  We know this sounds confusing but it can be explained as follows:

While you are negotiating with an employment agency you should be offered two different pay rates, one to be paid directly through the agency's payroll and another, higher rate, to have your pay processed through an Umbrella Company. The lower rate will apply if you opt to be paid directly by the company because they themselves will be liable for the Employer's NI. The higher rate is offered to be paid through an Umbrella Company because the employment agency is passing the employment cost to the umbrella company who will deduct this and pay to HMRC as part of the process in calculating your gross pay.

Annual Self Assessment Tax Return

If you are requested by HMRC to submit a tax return you must declare the income received from your employment with Sprite.  We will provide you with a P60 if you are employed by Sprite at the end of a tax year or we will have provided you with a P45 which shows your earnings and tax deductions required for completion of you Self Assessment Tax Return.

Although we do not prepare the tax return on your behalf through our partner network we will happily suggest a firm of accountants who will will for a fixed fee prepare and submit your return for you.