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aldman
26th July 2012, 19:00
I've just started contracting and the umbrella company I was pointed toward has paid me for two weeks in 1 week causing me to pay a lot more tax than I needed to. When I tried to change the agency says I have to use 1 of 3 umbrella firms. The one I am currently using has a bad rep, if you believe the internet so I had picked one that seemed to be well thought of but they're not one of the 3. Can't I decide which umbrella firm to use..

LisaContractorUmbrella
27th July 2012, 13:02
If you are on a cumulative tax code your overpayment of tax will be rectified in your next payment. Only one tax free allowance can be used in any payment period e.g.

Earnings month 1 £2000 (one invoice) tax free allowance £675.00 therefore taxable pay is £1325.00
Earnings month 1 £4000 (two invoices) tax free allowance of £675.00 therefore taxable pay is £3325.00 (which is obviously more than £1325.00 x 2)

However if you are not paid in month 2 you would still receive your tax free allowance which would then be carried forward to month 3 therefore

Earnings month 3 £2000 tax free allowance £1350.00 (£675 x 2) therefore taxable pay is £650.00 (rather than £1325 as it was in month 1)

HTH