PAYE Tax Calculator
PAYE Employment Contracting
BITE offers the facilities for many contractors to PAYE (Pay tax as you earn) through them by being employed by its specialist limited company umbrella service either as a specialist Consultant or as an employee under the Swedish Derogation. This is an ideal facility for the first time contractor or new arrivals to the UK who do not wish to take on the financial and administrative commitment of running their own limited company. Additional products are then provided for contractors according to their gross earnings and whether they are likely to be outside the IR35 Directive.
With the new AWR, the IR35 Directive effective from April 2000 and recent case law from 2008 onwards, for many contractors there may be little or no benefit in operating a limited company and the payroll solution may be the best opportunity (with the accountancy fees it may incur) and the payroll solution may be the best opportunity for them, because it avoids the set up and maintenance costs of running a limited company and provides additional umbrella company benefits.
Contractors and National Insurance
Contractors working through a limited company have to be employed by that limited company. This means they have to pay two types of National Insurance, firstly employers National Insurance, the tax levelled on companies for employing staff (currently 12.8%) and secondly employees national insurance, the tax that employees have to pay for the national health service, pensions etc., currently (11.2%) so there area real benefits to reducing this burden through expenses, pensions or dividends.
Anyone working in the UK requires a National Insurance Number (NI No.) This is the means by which certain taxes are automatically deducted from your wages. It is also through this number that any refunds can be traced.
The taxes have to be paid irrespective of your nationality or personal circumstances.
The NI deductions are a government tax that principally provides funds for the UK Health Care and Social services. Currently the NI Contributions pay for hospitals and other aspects of the Health service. It is also used as the basis for state pension and other benefits including job seekers, child benefits etc.
Everyone working in the UK who earns above £92 have to pay their own NI contribution, regardless of their nationality or residency status. NI maybe refunded if you leave the country permanently.
Company Directors and shareholders can claim dividends based on the profitability of the company and these are subject to corporation tax rather than income tax which is now due at the same rate 22% of Income tax and 32.5% once earnings exceed 38k +, In each tax year rather than 40% high rate income tax. Dividends do not attract national insurance which can be as high as 24% when company NI and employee’s NI are added together for IT contractors. Dividends need to be paid correctly to legal directors owners and investors in UK onshore companies.
All employees have to pay income tax, which is deducted from your earnings, automatically by your employer. This is known as P.A.Y.E. (pay as you earn). You can learn of the current rates etc. by visiting www.inlandrevenue.gov.uk/rates.