Having a good grip on your finances is key when it comes to contracting, especially…
Getting into the routine of checking your payslips as an umbrella contractor is vital to ensuring you are not involved in a tax avoidance scheme and that deductions have been correctly calculated. Carry on reading for a quick guide to understanding your payslip.
Income tax
When working with an umbrella company, the taxes you owe will automatically be deducted from your payslip. The percentage deducted depends on which tax bracket you’re in.
The standard tax code for 2021/22 is a 1257L – this is the one you should see on your payslip as an umbrella contractor with one employment, no taxable company benefits and no additional income.
National insurance
All employees have to pay a national insurance contribution based on their earnings. Umbrella companies are responsible to pay HMRC for Employers’ National Insurance Contributions on your behalf. It’s important to note that employer’s national insurance rates will revert back to 12% and 13.8% this November 2022, so make sure your payslip is still accurate next month!
Head the HMRC website to find out how much income tax and national insurance you should be paying.
Additional deductions
Student loan – If you’re paying back a student loan then this will show up on your payslip. The amount deducted is calculated on how much money you earn, as well as which repayment plan you’re on.
Pension – At Mint Umbrella, we offer all candidates the option to opt in for a pension and again, this will be reflected on your payslip.
Holiday pay
As an employee of Mint Umbrella, you are entitled to 28 days of statutory leave entitlement. This is calculated at 12.07% of the taxable salary, and is taken from each candidates’ contract rate should they opt in. If your holiday looks incorrect, you can calculate it yourself using the government’s holiday entitlement calculator.
Found a problem with your payslip?
If you’re uncertain about an aspect of your payslip or something doesn’t seem quite right, get in touch with someone from the umbrella company you’re working with to discuss the problem. In the case that you do not receive a clear answer or fail to find a solution then drop HMRC an email at [email protected] and they will be able to help.
Received more money than is recorded on your payslip?
This is a sign that you could be involved in a tax avoidance scheme. In this scenario, report the situation to HMRC by completing this online form or calling them on 0800 788 887.
Things to look out for:
Certain payslips will not show all the payments listed above, especially if there are loans involved. A compliant umbrella should, however, be transparent about deductions.
Your payslip may just show payments made through PAYE so that the umbrella company looks like it’s compliant with tax rules.
Your umbrella company could be making additional payments into your bank account along with an email to confirm you have received the funds as a loan, annuity, nouns, share profit etc.
Your umbrella company has told you that some of your employment income is not taxable.
Ensure you’re not paying fees that are higher than agreed.
Mint Umbrella is an accredited umbrella provider so work with us now to get the most out of your contracting journey!
Our friendly team is also here to answer any queries you may have about your payslip, so don’t hesitate to get in touch.