Why do Umbrella Take Home Pay calculations differ?

So you’ve got some take home pay calculations from some umbrella companies. But why do the take home pay calculations differ?

The simple answer is that they shouldn’t!

All umbrella companies should operate PAYE. This means that tax and national insurance contributions are taken as a percentage of earnings after certain allowances. These are all determined by HMRC.

The only difference will be the margin that the umbrella retains (and the level of service you will receive). If you do get different figures from different umbrella companies, check out the small print; you will probably find that something has been included in the calculation that you didn’t input.

The following is an example of a calculator available online:
Based on the information that you have provided, your estimated take home pay and expenses will be:

£1,253.38 Per Week OR £5,429.34 Per Month OR £64,905.09 Per Year

This looks great doesn’t it? On the original site, it is nice and clear with your take home pay in nice big letters and highlighted in green to make the figures even clearer. What is written below, in much smaller letters, will explain why this company is declaring a higher take home pay than other calculators that you may have looked at: Based on working 40 hours per week, 2013/14 tax rates, claiming average expenses (for an employee working and staying away from home of £318 per week).

So why do umbrella take home pay calculations differ?

As you can see, the umbrella company has assumed that you have spent £318.00 per week. They have also assumed that this amount is allowable as an expense! Your payslip will come as a bit of a shock if you haven’t spent that much or if anything you have spent isn’t allowable. If you are entitled to claim expenses you will receive tax relief on them which will appear to increase your tax home pay. You should remember that you will have incurred the cost of whatever you claim i.e. a cost of £200.00 will result in tax relief of £40.00 for a lower rate tax payer but you still will have spent the £200.00 in the first place!

So, our advice, if you are given a take home pay figure from a standard umbrella company i.e. PAYE that’s higher than others, ask them if they have assumed a figure for expenses. Oh and if you only work 35 hours a week, again, your payslip will not be what you expected – this quote was based on a 40 hour working week! Just make sure it isn’t Too Good to be True!