Umbrella calculations help.

[rsingh]

Hi could somebody help me by checking the figures below for me please that I got from an online umbrella calculator.

Case 1: Daily rate 500pd, no expenses.

Employer's NI 283.46
Employee's NI 108.85
Employee Tax 741.40
Total All Tax 1,133.71
CU Margin 26.50
Total Net Income 1,339.79


Case 2 Daily rate 500pd, expenses 500pw


Employer's NI 222.83
Employee's NI 100.04
Employee Tax 508.15
Total All Tax 831.02
CU Margin 26.50
Total Net Income 1,642.48

I'm a bit hard of thinking this afternoon, so was wondering how I could end up with more net income with the extra expenses.

[Craig@Clarity]

The expenses you incur are taken off your day rate so that you end up with a lower day rate being subject to tax and NIC calculations. The net pay calculations that are given usually also include the expenses reimbursed which technically isn't extra income because you'd have spent £500 personally in the first place.

[rsingh]

Of course - thank you Craig.

[MrRobin]

Indeed. the £500 expense is taken off the total for calculation of taxes and then is added back in for the net amount you receive.

If you're earning £500 per day and have been contracting since Sep 2007, please tell me that you haven't been using an umbrella the whole time??

[rsingh]

[QUOTE=MrRobin;1455888
If you're earning £500 per day and have been contracting since Sep 2007, please tell me that you haven't been using an umbrella the whole time??[/QUOTE]

I've always worked through a Ltd. A former colleague asked me about the different ways of setting up in order to go contracting. I used an online calculator in order to provide illustrations - however was stumped when trying to explain the above differences.