Your Pay

Payroll

When you work for bbu as a Temp you will be paid by us, on a weekly basis, according to the hours you state on your timesheet.

We process all your tax and NI deductions from your gross pay and pay your net pay direct to your bank account each week.

bbu is a registered payroll bureau with HMRC and has a PAYE reference. We are therefore authorised to submit your P45 and Starter’s Checklist details to HMRC and also submit full details of your pay and deductions on a weekly basis (RTI) as and when you get paid. HMRC will therefore have full and complete records of your pay at all times.

HMRC will inform us of any tax code changes so that we can keep your records constantly up to date.

When you start working for us there will be various forms we will ask you to complete giving us all the information we require to ensure that you are paid the correct amount each week. This information will contain your bank details, your NI number and your current address. If you have a P45 showing your previous pay this current tax year, these details will be applied to your records and your record will be updated. If you haven’t worked before you will need to complete a Starter’s Checklist which will show us your current status. These forms will be submitted to HMRC who will update us on your correct tax code and any other information relevant to your pay.

The UK payroll system is designed so that your current employer and HMRC keep the same records at all times so that your pay is constantly updated.

When you leave us, upon request, we will issue you with a P45 which you take to your new employer.

At the end of the tax year we will issue you with a P60 which will include all your pay, tax and NIC details for the full tax year.

Free Pay and Tax Codes

Our free pay allowance changes every year. For 2017/2018 the tax free pay is £11,500 for the year. Your tax code reflects your annual free pay allowance so if you are entitled to the full allowance your tax code will be 1150L and you can earn £11,500 in a year before paying any tax. If you are weekly paid your weekly free pay (before you pay tax) will be £11,500 divided by 52 which is £221.15. You will only pay tax on anything over that amount.

Tax is accumulative so if you don’t work for (say) 3 weeks you will have 3 weeks unclaimed free pay £221.15 X 3 = £663.45.  This means that the next time you work you will have £663.45 plus £221.15 (free pay on that current week) before tax.  If you earn less than that you will have a tax rebate.

An X after your tax code means you are on Week 1 (or emergency tax). This means that your work history is unknown to the tax office, so accumulation is impossible. You will get one week’s free pay allowance per week while on that code; hence Week 1 tax.

When the tax office becomes aware of your work history from a previous employer (P45) they will adjust your tax code to reflect that position.  It could be that you have overpaid tax and your new tax code will provide you with a tax rebate – or that you have underpaid tax and the tax office has to adjust your tax code to reflect this.  If your tax code changes to (say) 657 it means you are now only entitled to 6570 per year and your free pay allowance will drop to 6570 divided by 52 = £126.34 before tax and the tax office will recuperate the tax you owe them.

If you have a second job, your code will be BR (basic rate) which means no free pay as your allowance will have been taken from your first job.  Students who don’t pay tax have the code NT (no tax).

P45

You receive a P45 from your employer when you stop working for them. It shows how much you have earned and how much tax you have paid in the current tax year. A P45 form includes information such as:

  • Your tax code and National Insurance number
  • The amount you earned in the current tax year
  • How much tax your employer has deducted in the current tax year
  • The date you stopped working for that company

A P45 has three parts. These are Part 1A, Part 2 and Part 3.

You receive all three parts. Part 1A is kept for your own records and parts 2 and 3 are given to your new employer (when you start a new job) or to the Jobcentre (if you are claiming Jobseekers Allowance).

Your P45 and P60 are the two most common tax forms you are likely to encounter. Every employee is entitled to a P45 and P60 by law while you may also be asked to complete a Starter’s Checklist form when you start work with a new employer.

P60

At the end of every tax year you should receive a P60. It is a summary of your pay in the previous tax year and any tax that has been deducted. It is a legal requirement that your employer provides you with a P60 if you were working for them at the end of the tax year (5th April).You will need your P60 if :

  • You want to claim back any overpaid tax
  • You have to complete a Self Assessment tax return
  • You want to apply for tax credits

While most people receive a paper version of their P60, a company is now allowed to send an electronic version if you have given your consent to receive it in this format. You must have access to secure facilities in order that you can look at your P60 and print a copy for your records.

Your P45 and P60 are the two most common tax forms you are likely to encounter. Every employee is entitled to a P45 and P60 by law while you may also be asked to complete a P46 form when you start work with a new employer.

The Umbrella Company

The umbrella company provides a payroll service to the Temporary Worker and bills the agency (who in turn bills the client) for work completed by the Temporary Worker. The umbrella company provides all social contribution and tax payments and equivalents and National Insurance returns on behalf of the Temporary Worker. All umbrella companies use the same calculations to ascertain how much tax should be paid. The only difference between umbrella companies will be the fee that they charge the Temporary Worker and the fact that they use Temporary Workers allowable expenses to set off against tax thus purporting to ensure the Temporary Worker maximises their earnings potential whilst still paying tax at source.

Some of the most common “allowable” expenses include: mileage & general travel expenses, hotel and accommodation expenses and professional subscriptions. Food and subsistence is rarely allowed to be claimed, as it is the HMRC’s opinion that you would eat regardless as to whether you are working or not. The exception to this rule is if you were staying away from home as part of the work.

Whilst many of the umbrella companies advertise similar offerings, much of the detail should be checked by the user. Often expenses are used as a selling point with potential abuse of “dispensation” agreements. It is the independent Temporary Worker who will be liable should HMRC decide, for instance, that expenses have been incorrectly claimed. A dispensation is simply a working agreement between a company and HMRC. It is a cost saving mechanism for HMRC that helps them reduce the number of tax inspectors.

Umbrella Company Charges

Umbrella companies normally keep a small part of the income or charge a small fee for processing Temporaries’ payroll and for some umbrella companies it will go towards Temporaries’ insurances. In the UK it is mostly a fixed weekly amount. Most of the UK-based umbrella companies advertise two types of charges.

Gross charge: fee that is deducted before tax. This is the actual charge that umbrellas deduct.

Net charge: for marketing reasons, many umbrella companies list their net charges, i.e. equivalent charges of gross charge after tax. This is to make the charge appear small.

Calculations of the net charge are simple. For example, if an umbrella charges gross 26.5 per week before tax, the net equivalent of this amount is, if the contractor is a basic rate tax payer (i.e. 20% tax): 26.5-0.2—26.5 = 21.2 pounds. If contractor is a higher-rate tax payer (i.e. 40% tax): 26.5-0.4—26.5 = 15.9 pounds. There is small faction of umbrella companies that charge a percentage of a contractor’s earnings, e.g. 15% of the contractor’s earnings.

Our Partners

Agenda SecurityRecruitment and Employment Confederation Visa Logic CEB

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Whitchurch House
2 – 4 Albert Street
Maidenhead
Berkshire
SL6 1PR

e: info@bburecruit.com
t: 01628 674805

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