PAYE is an acronym for Pay As You Earn. When you are paid under the PAYE system, income tax and national insurance contributions are deducted from your wages before the money hits your account. Wages include money earned not only from the job that you do but sick pay, paternity and maternity pay.
Can I pay less tax with an umbrella company?
In the UK, umbrella companies pay their contractors under PAYE rules. Some less than scrupulous companies may claim that they can help you take home more money, but these should be avoided. This is because they can only achieve this by failing to comply with the law. Those that work under reputable umbrella companies such as the One Click Group don’t risk finding themselves in hot water due to the way that they are paid, as they pay the same rate of tax and NI as directly employed workers.
Tax codes and deductions
When you work under an umbrella company, you are given a tax code by HMRC. This code determines how much of your wages will be used for paying taxes. You will be sent a PAYE coding notice by HMRC which will tell you how your tax code was calculated. You can get in touch with them if you do not receive one. Your employers will use this code, so they know how much to deduct from your payslip. NI contributions will also be taken from your gross pay. The amount you pay will also be a percentage of your total earnings. However, the percentage is the same for all, no matter how much you earn.
Does PAYE cover all income?
PAYE will only be used to deduct tax from your wages. If you do source funds from elsewhere, you will need to declare this to HMRC through the self-assessment process, so you know how much tax you need to pay. Any earnings of more than £1,000 outside of wages need to be declared. If you are a limited company, most of your income will come from your dividends. These need to be declared via the self-assessment system.
How One Click Group can help
At One Click Group, we can come to your assistance if you are interested in becoming part of an umbrella company. There are many advantages to using an umbrella company – when you use our services, you can focus on what you do best safe in the knowledge that your tax and NI obligations are being handled by competent professionals that you can trust. We can also log your expenses and store copies of your receipts to keep everything clear and simple. What’s more is that we can simplify things even further by completing your return for you for a modest fee.
Talk to us today
If you need someone to take care of invoicing, administration related to tax and NI, chasing invoices and processing payroll, we can step in and get the job done to the highest standard. Don’t hesitate to get in touch to find out more if you do require further information before opting for our services. Why not contact us on 0345 557 1287 right now?
Along with over 13 years experience in the contractor payroll industry, and after spending most of his working life as a financial advisor in the regulated financial services industry, Mike has garnered an extensive network of contacts in the recruitment industry, many of whom trust both him and the One Click Group to handle their accounting. Mike has also been a member of various industry bodies throughout the years, such as the British Institute of Recruiters, in order to champion best practices across the contractor payroll industry.