The Umbrella 4 Contractors service is administered by Chartered Accountants who have been providing services to contractors since 1996.

	Maximise income	Tax compliant
	Complete flexibility	No set up or closing costs
	Competitive fees	No hidden charges
	Hassle free	Online timesheet system

Budget 2011: Raft of changes to PAYE and NICs rates and thresholds for 2011-12 tax year

Gains for lower and middle income umbrella contractors, loss for higher paid contractors.

April 4 2011

There have been a number of changes to PAYE and NIC tax rates and thresholds either announced or confirmed in the March 23^rd Budget to take affect from April 6^th. All of these changes have been reflected in our online net pay calculator for umbrella company contractors.

The annual allowance increases from £6,475 to £7,475. The higher rate threshold drops from £37,400 to £35,000. The 50% additional tax rate remains for now, but was described as "not permanent". The weekly threshold for employee's NI is now £139, up from £110, with the lower rate for employees NI up from 11% to 12%. The higher rate threshold for employees NI is down to £817 from £844 with the rate above that threshold up from 1% to 2%. The employers NI threshold also increases from £110 to £136 with the rate also up from 12.8% to 13.8%.

Naturally, it is difficult to understand just by reading those figures exactly what they will mean to umbrella company contractors. In a nutshell, lower and middle rate contractors will enjoy slightly increased net incomes, while higher paid umbrella contractors will experience a slightly reduced net pay. As demonstrated in the following three examples:

Example 1:

A contractor earning £10/hour, working 37.5 hours per week before the changes would have been taking home £294.60 per week after tax (net pay: 78.6%). From April 6^th the same contractor working for the same rate and hours will now keep £301.71 (net pay: 80.5%).

Example 2:

A contractor earning £20/hour working 40 hours a week with £120 of weekly expenses would have earned a net pay of £560.16 (70.0%) but will now keep £562.06 (70.3%) after tax.

Example 3:

A contractor earning £400 per day working 5 days per week, with £200 of expenses and putting 15% or their earnings into a pension would have had a net pay of £1392.48 (net pay: 69.6%) but under the new tax bands and thresholds will now keep £1380.75 (net pay: 69.0%).