Umbrella Company Salaries

With an Umbrella Company the vast majority of your Income will be paid further to the Pay as You Earn (PAYE) system; therefore you will need to pay Income Tax, Employees National Insurance and Employers National Insurance on the sum.

Are you a highly skilled contractor on a UK Work Visa? Do you need a Contractor Solution to deal with project billings? If so Commonwealth Contractors can help!

We work with Umbrella Companies who specialise in dealing with highly skilled expat contractors. To discuss your situation with a highly experienced advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!

Umbrella Company Payments

An Umbrella Company will:

  • Receive Contract Billings from a Client or Agency (e.g. £10,000)
  • Deduct an Admin Fee (e.g. £150)
  • Allow a Contractor to Claim Genuine Business Expenses (e.g. £850)
  • Pay the remainder of Billings further to the PAYE System (e.g. £9,000), therefore;
    • Employers National Insurance must be deducted
    • Employees National Insurance must be deducted
    • Income Tax must be deducted

The Umbrella Company will then pay the Net Salary as well as any Reimbursed Expenses into the Contractors bank account.

Income Tax

An Umbrella Company will deduct Income Tax from you PAYE Income further to;

  • A Tax Code, AND
  • The Tax Bands set out below

Tax Code & the Personal Allowance

Most people in the UK will get a Personal ‘Tax Free’ Allowance. The level of your Personal Allowance is normally worked out further to your Tax Code.

In the current financial year (2011 / 2012) the current standard Tax Code is 747L, which means that you get a £7,475 Personal Allowance and tax deductions are worked out on a cumulative basis.

If you have worked for another company in the current tax year and you do not have a P45 the Umbrella Company will get you to complete a P46 and place you on a 747L Month 1 Tax Code. The Month 1 Code breaks the tax year down into 12 equal segments so you receive one month’s tax allowance for one month’s pay.

2010 / 2011

2011 / 2012

2012 / 2013


Personal Allowance

£6,475 £7,475 £8,105 £9,205

Income Limit for the Personal Allowance

In the 2010 / 2011 Tax Year an ‘Income Limit for the Personal Allowance’ was introduced.

The Income Limit reduces an individual’s Personal Allowance by £1 for every £2 of income above the maximum limit of £100,000 per annum.

Tax Bands

Income Tax is calculated using a series of tax bands. The Income Tax Bands for the for the current, past and future tax year are detailed below.


2010 / 2011

2011 / 2012

2012 / 2013

2013 / 2014

Basic Rate: 20%

£0 – £37,400 £0 – £35,000 £0 – £34,370 £0-£32,245

Higher Rate: 40%

£37,401 – £150,000 £35,001 – £150,000 £34,371 – £150,000 £32,246 – £150,000

Additional Rate: 50%

(cut to 45% from April 2013)

Over £150,000 Over £150,000 Over £150,000 Over £150,000

(Rate is now 45%)

Employees & Employers National Insurance Contributions

Class 1 Employees National Insurance

Class 1 Employees National Insurance is paid by an employee on his or her salaried income.

It is levied at a rate of 12% between the Primary Threshold and the Upper Earnings Limit.

Any Income above the upper earnings limit is taxed at a rate of 2%. Therefore a ‘cap’ is in place to reduce the level of national insurance paid by high earners.

Employees Class 1 National Insurance is applied as detailed below 2014 to 15:

  • 0% below the Primary threshold of £153 per week
  • 12% between the Primary threshold (£153.01 per week) and the Upper Earnings Limit (£805 per week)
  • 2% on earnings above the Upper Earnings Limit of £805.01 per week

Class 1 Employers National Insurance

Employers National Insurance is payable by the employer on an employee’s salary and benefits.

Employers National Insurance is levied at a flat rate of 13.8% above the Secondary Threshold; there is no upper limit or ‘capping’.

Employer Class 1 National Insurance is applied as detailed below:

  • 0% below the Secondary Threshold of £153 per week
  • 13.8% above the Secondary Threshold of £153.01 per week

Find out More

To find out more about Commonwealth Contractors call now on 0330 390 9021 or Submit your Details and we will get right back to you!