Umbrella companies

[Deaksy]

Hi,

Ive just started a new contract through an agency I have used before, on starting the job I have been advised to use an umbrella company to process my wage.

Now im no accountancy whizzkid thats why I work in construction and before any one says anything yes I have contacted them about this(and im still non the wiser) but they are processing my hours @ minimum wage to in thier words to keep my tax down and as long as I send my reciepts to them and a bonus payment which is in the box below the final figure will be lower so I will get paid more......if ive lost you now thats where I'm at

I earn 18.00 an hour, being that I have a UTR no, why am I not getting paid the rate Ive agreed for the hours that I work less tax,less insurance and the fee for pressing a button to transfer the funds, I couldn't care less about expenses as far as I'm concerned you are paying for life as soon as you wake up in the morning so whats a bit of petrol and food if you need to cover these things ask for a better rate or work more hours.

Anyways getting back to this umbrella company how are they using expenses to make up my wage which incidently works out at less than I would get going down the route above.

If any one can explain this to me it would definately broaden my horizons

[realityhack]

Moved, as originally posting this in General wasn't the best idea.

[TheFaQQer]

It's nothing to do with keeping your tax down, it's to do with how they have to deal with paying you when you aren't invoicing. During that time, you are your employee, so they have to keep paying you.

So, you have a contract which pays you minimum wage, and then a bonus, which will add up to the income you have invoiced (minus tax and minus their charges).

It also covers them if they don't get paid by the agency - the contract with you will only mean that they have to pay you minimum wage, until they can pay the "bonus" when they get the money from the agency.

[LisaContractorUmbrella]

I hope that this https://www.linkedin.com/pulse/artic...is-to-umbrella will help explain why you have ended up working with an umbrella company.

I have a few concerns about your post:

Whether or not your earnings are split between minimum wage and a bonus will not affect your tax position as both pay elements are taxable. The company you are working with seems to be implying that the bonus element is somehow taxable at a lower level or perhaps not at all. If this is the case you could find yourself in a sticky situation with HMRC at a later date.

They are obviously encouraging you to claim expenses, by the sound of it, whether you have incurred them or not. If you work with an umbrella company you may be entitled to tax relief on certain expenses but only for costs incurred which are considered allowable by HMRC.

The reason that your gross earnings are not £18 per hour is because the umbrella company, like any other UK employer, has a legal obligation to pay Employer's National Insurance contributions; they will also retain a margin for the work that they do. These amounts are deducted from the contract value before your salary is calculated.

HTH

[moggy]

I think you need to choose another Umbrella company.

If they can't explain it to you so that you understand, they are not worth using. It's their job to help you understand all of this.