We’re delighted to have discovered a new umbrella company calculator that boasts honest and instant results for contractors, freelancers and temporary workers in the UK. Keep reading, and we’ll share the new tool with you, as well as explain why we think it’s worth its weight in gold.
Umbrella Company Calculator
The new umbrella company calculator is great for many reasons, but firstly, here’s the vital information. You can use the umbrella company calculator now for free, and you can use it as much as you want. And, an umbrella company doesn’t power the tool. Instead, it’s been developed by the team that runs umbrellacompanies.org.uk – a leading online resource for temporary workers since 2010.
The calculator has been created to provide UK contractors, freelancers and temporary workers with a realistic take-home pay projection to use an umbrella company for their payroll. And, because it’s independent and not founded by an umbrella – there is no foul play. The results are a breath of fresh air because the calculations are based on honest figures (unlike some umbrella companies which use dodgy figures to try and trick workers). The new calculator uses clever algorithms to produce results you can trust.
When you request a calculation, you can choose:
- Your contract type.
- Rate of pay (hourly or daily).
- The number of days you work in a week.
- The umbrella company’s margin (because all umbrella companies deduct a margin for processing payroll, and the margin varies between providers).
- Whether you’re paying back a student loan.
Once you’ve completed the easy-to-follow 4 step form, you are required to enter your email address where your tailored umbrella company calculation will be sent. It’s as simple as that.
The email you receive is far more than just a pay projection. You’ll receive a full breakdown of your pay, including all the specific deductions that will be made:
- Income tax.
- Employee’s National Insurance Contributions.
- Employment costs (Employer’s National Insurance Contributions and the Apprenticeship Levy).
- Student loan repayments – if applicable.
- The umbrella company’s margin depending on the figure you entered into the calculator.
The umbrella company calculator will present you with results in a similar fashion to a Key Information Document.
Why are so many umbrella company calculators untrustworthy?
Every umbrella company has its own in-house calculator that it uses to create take-home projections. However, from our own research, most umbrella companies will try and inflate the calculations they give to workers, and they do this for one reason – to try and convince people that they’ll retain more of their money with that umbrella compared to the competition.
The truth is that all compliant umbrella companies process payroll in the same way – they follow HMRC’s Pay As You Earn (PAYE) tax system. The only thing that will vary a worker’s pay from compliant umbrella to compliant umbrella is the margin they deduct. It’s as simple as that.
The concept that umbrella companies use tactics to try and mislead contractors into using their service doesn’t sit well with us. Thankfully, the new umbrella company calculator sets out to clear up any confusion.
The most common ways an umbrella company will inflate its projections:
- Use the wrong tax code for a worker.
- Add an expenses allowance, even though most umbrella employees cannot claim tax relief of expenses due to Supervision, Direction and Control (SDC).
- Quote the net margin, not gross (which makes it sound like an umbrella had a lower margin when they don’t).
- Fail to take the workers real circumstances into account (for example, they won’t account for time out of the office, etc.).
- They don’t consider the £100,000 abatement.
- Exclude student loan repayments.
What science has gone into the new umbrella company calculator?
A lot of science has gone into the new umbrella company calculator, as confirmed on the website. This includes:
- Realistic tax code – 1257L Week 1 / Month 1 tax code and Class 1 National Insurance.
- Weekly calculations are based on working 48 weeks in a year to account for time out of the office.
- Monthly calculations are “based on 52 working weeks per full tax year because it creates a calculation using the average number of working days per month, which is 21.66 days (52 weeks ÷ 12 months x 5 days per week).
- As mentioned earlier, you’ll be sent a breakdown of your results – showing the deductions that have been made. You’ll even get a pay retention percentage which is always helpful!
- Employment costs are clearly shown and broken down.
- Student loan repayments are optional. Some umbrella companies will exclude them to inflate calculations.
- The calculator clearly states that pension contributions are not included because a majority of umbrella employees prefer not to opt into the umbrella company’s preferred pension provider.
- Holiday pay is clearly shown at 12.07%.
- The calculator states that for “every £2 that you earn over £100,000 per annum, your personal allowance decreases by £1.” This £100,000 abatement is taken into account when you use the new umbrella company calculator. This is wonderful for transparency purposes.
It’s essential they before you use the new tool, you understand that it is just a projection. The results cannot be taken as gospel, and your actual take-home pay through an umbrella company could vary due to many factors. That said, we like the new calculator and the whole Umbrella Company Calculator website. There is not heaps of information but what is available is helpful. We highly recommend you try it out and request a free umbrella company calculation now.