PAYE Tax
PAYE or Pay As You Earn is the system used by HMRC to collect income tax and national insurance contributions from employees. The system is used in the UK and employers will deduct income tax and national insurance contributions from each employee for each pay period.
Tax is usually paid monthly and spread across a whole year. Employers will collect these contributions and send them onto HMRC. The contributions made by an individual will be detailed on their pay slip.
At the end of the year employees get a P60 which lists the total amount you paid in PAYE tax for the previous tax year.
Umbrella Companies and PAYE Tax
Many contractors make use of recruitment agencies. These usually offer the least tax beneficial options to contractors. This is because you will have to pay full tax and national insurance contributions on all earnings. Furthermore contractors would not be able to claim for business expenses.
Umbrella companies help both contractors and recruitment agencies save money. Companies like us are able to enable contractors and freelancers to claim legitimate expenses. All claims are done so in compliance with HMRC guidelines. Our services also mean that we can take care of the payments of income tax and national insurance contributions. We specialise in administration.
