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As an umbrella company contractor, you may have noticed that the Apprenticeship Levy appears on your pay statement. It’s perhaps not a tax that you’d automatically assume would be payable by those working via an umbrella company, so here we take a look at why this is the case.

Umbrella company tax

First, let’s look at umbrella contractor tax:

As an employee of an umbrella, you will receive a detailed pay statement (not to be confused with the payslip!) highlighting all umbrella employment costs and employee tax deductions.

A deduction that you may not expect to find on an umbrella contractor’s pay statement is Employers National Insurance because, well… you’re not an employer!

However, an umbrella company works slightly differently – although it is classed as an employer and is therefore subject to employers NI, it isn’t benefitting from any of the work being carried out by its workers.

And so, the employers NI is deducted from the umbrella income, before the worker’s salary is calculated.

As a side note, this is most certainly something to take into consideration when an umbrella contractor is setting or negotiating their rates of pay, because, if you were paid the same amount as a permanent employee, you would end up taking home less due to the deduction of employers NI.

Another unexpected deduction for an umbrella contractor is the Apprenticeship Levy…

What is the Apprenticeship Levy?

Designed to fund apprenticeship schemes, the Apprenticeship Levy was introduced by the government in April 2017 and allows employers to recoup some of the costs incurred by providing training for apprentices.

Each employer will receive an annual allowance of £15,000, which is offset against their Apprenticeship Levy payments – it’s not possible to carry over any unused allowance into the next tax year.

Why do umbrella company contractors need to contribute to the Apprenticeship Levy?

The Apprenticeship Levy applies to all UK companies with an annual wage bill in excess of £3m. It is a small tax charge of 0.5% of the company’s gross payroll and is paid on a monthly basis to HMRC.

Just as is the case with the employers NI, because an umbrella company is classed as an employer, the Apprenticeship Levy is another type of tax that they are liable to pay.

Contractor Umbrella are proud to be a Levy Network Donator. We contribute to the scheme which enables the FCSA to provide training on apprenticeships and other worthwhile programmes. Find out how you could benefit from the FCSA levy fund by reading more here.

Tax avoidance schemes

Due to these added costs that come with working as an umbrella company contractor, it may be tempting to try and save money in other areas, which is why it’s important to be aware of tax avoidance schemes that could try to take advantage.

Of course, most umbrella companies will be compliant with tax rules, but, if you come across one that claims you’ll be able to keep more of your earnings than if you were to contract through other companies, this could be a red flag and a clear sign of an illegal scheme.

It’s never worth the risk of using one of these companies, so make sure that when looking for an umbrella company, you check their credentials and reviews, and get as much information on them as you can before fully committing.

Contractor Umbrella

Hassle-free and straight talking, Contractor Umbrella has been helping contractors since 2002 and is now one of the most trusted umbrella companies in the UK guaranteeing peace of mind, absolute compliance and complete security for all its employees.

Award-winning, Contractor Umbrella is one of the longest-standing and most respected umbrella companies in the UK and is fully FCSA accredited.

Why Choose Contractor Umbrella?

Contractor Umbrella is the hassle-free, straight talking umbrella company that provides umbrella employment for UK based contractors and freelancers. Independently voted as the best umbrella company by the readers of Contractor UK.

As one of the most trusted umbrella companies in the UK, we guarantee our employees peace of mind, absolute compliance and complete security. We are one of the longest standing and most respected umbrella companies in the UK.

If you’d like to find out more, call us on 01206 591 000 or request a call back by completing our online form.

Benefits of working through Contractor Umbrella;

  • Fast and easy registration –  be ready to work in 24 hours, simply register online and we’ll take care of the rest.
  • Calculate your take home pay – use our online calculator to find out how much you could be taking home through Contractor Umbrella.
  • Same day payments – We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.
  • Our Service Guarantee – is our guarantee that you will be looked after at every step of the way.
  • Flexible Limited Company accountancy – when you sign up to our sister company Dolan Accountancy, you can transfer to Contractor Umbrella when umbrella employment better suits or your assignment sits inside IR35.
  • Employee Benefits at Contractor Umbrella there are many benefits available to you as our employee including Childcare Vouchers, our Employee Rewards Scheme, Group Pension Scheme, Foreign Currency Exchange, Contractor Accommodation, Contractor Mortgages and much more.
  • Expert Contractor Support Team – Every employee of Contractor Umbrella has access to our expert Contractor Support Team who are available to deal with any queries that you may have. You can get in touch with the Contractor Support Team, through the online chat, by email or by telephone.
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