Umbrella travel expenses

UK PROFESSIONAL DRIVERS FORUMS THE UK PROFESSIONAL DRIVERS FORUM (INTERACTIVE)
1

As I understand it; an Umbrella company has to pay Employer’s NI, at 13.8%, on earnings above £136 per week.

Let’s say that I have business mileage of £67.50p per week (150 miles * 45p mile).

Let’s say that I worked 50 hours, at £12.00 p/h, £600.00 per week gross,…

is the £67.50p business mileage taken off the £600.00 gross (i.e £464.00) before Employer’s NI ?

The effect would be that only £396.50 is now “taxable” for Employer’s NI at 13.8% ((600-136)-67.50 = 396.50).

Now my question (assuming I haven’t made any errors so far)…

Has the Employee, with the above in mind, enjoyed any benefit that may effect their own PAYE calculation ?

2

Umbrella companies work in different ways so you need to ask the particular umbrella company for an illustration relevant to you.

What has been told to me by an umbrella company is that they don’t take employers NI off but they do take an amount equal to it if you are on PAYE with the umbrella. (Splitting hairs)

So for a person with NI category letter “A” your £600 will come down by £61.68 if they take it from your £600. But some will take the expenses off first and take the NI equivalent off last. So if you had £117.50 expenses you would pay ERs NI on £482.50 which is £45.47.

Most umbrella companies either rightly or not allow you meal allowance at say £10 per day and mileage in your own vehicle to a temporary work place at 45p per mile.

Over 5 days you say 150 miles. You could also get £50 meal allowance giving expenses in that week of £117.50.

This reduces you wage to £482.50. Then the Umbrella will take their fee, say £15, and a fee for employers NI of £45.47. Your wage for tax and employees NI is now £422.03. Just using a simple week 1 basis your tax on this would be £45.94 and your NI would be £32.28 giving you net pay of £343.81. Add back in the expenses for meals and mileage and you get to take home £461.31

However it could be said that if you did not go through the umbrella company then your hourly rate would be lower and this might mean that as PAYE you would have earned maybe £500. Tax & NI on £500 = £61.60 & £41.64. This would give you a take home pay of £396.76. Seemingly about £65 worse off.

However on the PAYE you should have “banked” holiday worth approx £60 (you may have to argue like crazy to get the right holiday pay off some employers) and you would still be able to claim your meals and mileage by filling in a P87 or self Assessment at the end of the tax year potentially giving you a further £23.50 back from the tax man.

So unless you have some other expenses to claim against tax you are worse off on a PAYE umbrella but you need to fight for your holiday pay and fill out a form once a year. But it all depends on individual circumstaces and some agencies are refusing to take workers on PAYE anymore.