Page 6 - Not Always Umbrella

aaCTUATLeXUAMPLAEL Contractor earns £600.00 gross per day. 5 days per week (£3000.00 p/w), umbrella ma rgin of £15 .00 and PEO bandin g of 17.50 % (20/21 rates and thresholds). VAT P/W Cashflow saving P/W £600.00 - £57.73 £542.27 eXAMPLE The taxable amount is the same for both products at £2,467.17. This amount will be subject to the contractors own tax code and employees’ Tax and NIC’s will be deducted at the appropriate rates along with any pension contributions and attachment of earnings, such as student loan etc. How does this compare to a PSC outside IR35? Clearly, this shows a drop of £179.36 per week. On the next page we have shown how the savings could benefit the agency, hirer and/or the contractor by using PEO. Sadly, we will not be able to achieve the same net earnings as a PSC that is outside IR35, but we can minimise the impact and reduce the overall shortfall. Product Umbrella PEO Taxable Margin/band amount P/W Cost to hirer or agency P/W Real cost saving P/W - £134.16 £15.00 £2,467.17 £3,000.00 £2,886.57 17.50% £2,467.17 Taxable PAYE Tax Employee NICs Pension (5%) Net take-home pay £2,467.17 £781.22 £123.57 £123.36 £1,439.02 Weekly Gross Income Tax, NIC, Corp tax and dividend tax Net take-home pay £3,000.00 £1,381.62 £1,618.38 05 Version 1.0 2020