PAYE tax code 1250L for partial year PAYE tax code 1250L for partial year
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  1. #1

    Nervous Newbie


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    Default PAYE tax code 1250L for partial year

    Do umbrella companies take the correct tax when you only work for a partial year?

    Like many people, I did not work the first 6-8 months of the current tax year due to Covid. I'm just starting work in December. So my total tax for the year will be less than if I worked all year.

    Let's do a quick example:

    Contractor in England with umbrella company
    tax year 2020 - 2021
    tax code 1250L
    income first 8 months: 0
    income final 4 months: 6000 / mo.

    Will the umbrella company take NI and income tax based on person earning 24000 this year, which is correct, or based on assuming person will earn 72000 this year, which is incorrect?

  2. #2

    bored now

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    Assuming you give them a P45 from your company the calculations will be right.

    Otherwise you will be on emergency codes and it will be fixed later in the year or in your tax return.
    merely at clientco for the entertainment

  3. #3

    Fingers like lightning


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    Quote Originally Posted by Williamz View Post
    Do umbrella companies take the correct tax when you only work for a partial year?
    Earnings for the year will be based on the P45 details received, then the taxable salary pro rata'd for the rest of the financial year.

    When an umbrella processes the pay it assumes that the taxable salary will be earnt up until the end of the tax year. If for any reason the assignment finishes before the end of the year, then you may see a rebate (assuming you do not work during that time to the end of the tax year).

    Best advice is to always check your personal tax account online as this will show you what HMRC are predicting your earnings for the annual period to be.

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