If you are planning on working through an Umbrella company it is important that you are aware of how they work so that you can get the best out of the service and ultimately keep more of your pay!
This is how it works:
When you work through an umbrella company you are working PAYE
You also pay the umbrella company a fee for their services. This can be a percentage- usually between 4-5% of the total invoice, or a flat fee charged each time you use their services. In essence they are all providing the same service- which is handling your payroll and Tax/ National Insurance contributions, but they do work in different ways, so it is worth speaking to 2 or 3 different companies to decide for yourself who will be the best option for you.
In order to counteract the fees charged by the umbrella company it is imperative that locums use the benefits of offsetting their expenses against their tax bill to make it work. Expenses are work related costs you incur during your working day.
The basic expenses are food and travel, the amount you can claim is usually limited to what is deemed reasonable. So if you need to take a bus and a train into work each day at a cost of £10 per day that will not be an issue. If you wanted a chauffeur driven Rolls the chances are it will not be covered!
There are other expenses such as work uniform, accommodation expenses and stationary that are acceptable. If you are unsure contact your umbrella company to discuss what you want to put through and they will tell you whether is acceptable.
You don't pay tax & NI on expenses - As an example:
If you put through £100 of expenses you will save yourself £45 in tax payments
If you put through £200 worth of expenses you will save £90 in tax payments
You can see that this will very quickly mount up. If you don't put through expenses each week you will not make savings, and using an umbrella company then becomes an inefficient system to use.
It is also important that you supply the umbrella company with your full P45 before you start as this will avoid unnecessary emergency tax of 40%.
It is always advisable for locums to submit their timesheet on a weekly basis.
Get the maximum out of using an umbrella company you can. If you want to discuss your payslip or charges from your umbrella company when you work through us, then do call us and we will happily go through it with you.