The Apprenticeship Levy came into force in April 2017. It means that all companies whose annual wage bill exceeds £3m are expected to pay a percentage of their payroll costs to HMRC. That money is then earmarked for the training of apprentices. The idea being that those employers who commit to training will be able to get back more than they put in by training sufficient numbers of apprentices.
The Apprenticeship Levy is payable through PAYE. It's to be paid alongside Income Tax and National Insurance contributions and will show as a company deduction on your reconciliation sheet. Each employer (including those operating multiple payrolls) receives an annual allowance of £15,000, which they offset against their levy payment.
All employers are legally obliged to pay Employer’s National Insurance to HMRC. Along with other deductions, Employer’s NI, must be paid to HMRC by whomever establishes themselves as your employer. So, under our employment umbrella, you’re our employee. Therefore, we bear the cost of employment.
What this means in practice is that the rate you’re paid for your assignment gets uplifted. This is to account for costs such as tax and Employer’s NI, etc. So, the money you take-home is similar to what a permanent employee would earn for the same job. What’s more, all the deductions required by law have been compliantly taken.
Your payslip should clearly outline any deductions, including Employer’s NI. With us, your take-home pay is completely transparent, with no hidden fees. Hence the importance of selecting a consistent and compliant umbrella provider.
Loan schemes are often referred to as ‘disguised remuneration’ schemes. They’re tax avoidance arrangements which are used by some people to avoid paying Income Tax and NICs.
Scheme users get paid their income in the form of loans. However, these loans are not intended to be repaid, and therefore ought to be taxable.
HMRC has always maintained that loan schemes do not work. For more information on how to avoid loan schemes, as well as details regarding loan charges, click here.
A Personal Allowance is the amount of income you’re allowed to earn before you start paying tax. The standard amount currently (as per the 2019/20 tax year) stands at £12,500.
According to HMRC, if you claim things like ‘Marriage’ or ‘Blind Person’s’ Allowance, your Personal Allowance may be bigger. Likewise, it’s smaller if your income is above £100,000.
To learn more about Income Tax rates and Personal Allowances, click here.
Many contractors provide services to clients via their own limited companies. In tax talk, this is often referred to as a Personal Service Company, or PSC.
A PSC is generally defined as a limited company with a sole director - the contractor. That person owns all - or the majority of - the shares. PSCs provide professional services delivered by an individual, direct to a client, or via an agency.
An overarching contract is a special type of employment contract. It links together a series of separate assignments. Under this agreement, temporary workers become employees of the employment business.