So what does this mean for our employees, what value does payslip auditing hold and why should you be concerned about your payslip’s compliance? In our blog we explore all this and more.

What is Payslip Buddy?

Payslip Buddy is a contractor focused solution designed to protect Umbrella employees from unlawful and / or ethical practices from Umbrella Companies. By auditing payslips, employees and agencies can check their Umbrella Company’s compliance.

Revolutionary within the payroll sector, Payslip Buddy audits the payslips we generate for our employees in real time, direct from our payroll software and cross-references with RTIs sent to HMRC. A report of our audit is then sent to our partnering agencies and our employees, meaning that you’ll receive an audit report each and every time we pay you.

Why is it important within the Umbrella Company industry?

Sadly for the Umbrella industry it isn’t a prerequisite for every Umbrella Company to have their payslips audited, so here at SG we’re proud to say that we have voluntarily signed up to have every single one of our employee’s payslips checked. If compliancy is followed and there’s complete transparency in the payment process, then there’s no reason why every Umbrella Company shouldn’t be Payslip accredited. That is if they don’t have anything to hide!

How does Payslip Buddy work?

As an SG Umbrella employee, you’ll have already received emails from Payslip Buddy, but if you’re thinking of joining us, you’ll be sent two emails from Payslip Buddy when you receive your first payslip:

• The first email will be onboarding email, which will ask you to activate your Payslip Buddy account. You’ll only receive his email once
• The second email will be an audit report for your first SG Umbrella payslip. You’ll then receive an audit report every month, which will be stored and recorded on your Payslip Buddy dashboard. With every audit stored in one, central place, you’ll be able to quickly and easily refer to them whenever you need to track your income, taxes and pension contributions

As a SG Umbrella employee there’s no obligation to signup to Payslip Buddy, but we believe for peace of mind and security it’s worth its weight in gold. Along with our Freelancer and Contractor Services Association (FCSA) accreditation our dedication to compliance and transparency in the way we operate, demonstrates to the whole contracting industry that we’re serious about our conformity.

Got questions about Payslip Buddy?

Take a look at our dedicated Payslip Buddy page, for more information.

Alternatively, speak to the SG Umbrella team today. They’ll happily talk you through the benefits of Payslip Buddy, how it works and how you’re able to opt-out should you wish.

The SG Umbrella team are always on hand to offer you support and guidance, ensuring your experience with us is nothing but exceptional. Get in touch today to find out more and speak to the team.

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When contracting as an employee of an Umbrella Company you may see variations in your pay, which will inevitably also mean changes in the amount of tax you’ll pay.

In this blog we look at the reasons behind tax changes in your payslip, to help you understand it further.

If you start a contract halfway through the year – you’ll have accumulated a balance of tax allowance, and therefore might not pay any initial tax when you start your contract.

Frequency of pay – your earnings and allowances for the year-to-date will determine how your tax is calculated and how much you’ll end up paying.

New tax year – starts on April 6^th every year, and this is when your tax qualifying earnings for the new tax start again from 0. Depending on your earnings and the current rate for personal allowance you may start paying tax, or even more / less than before.

Tax free personal allowance – The standard personal allowance is currently £12,570 for the tax year 2024/25, and will be fixed at this rate until 2027/28. As a PAYE employee of a Umbrella Company, your allowance is spread across 12 months, so there’s no payment for income tax for the first £242 a week (if paid weekly) or £1,048 a month (if paid monthly).

What happens if you’re not currently contracting – you may find that your tax is reduced when you do next get paid, to account for the missed weeks / months of work.

Non-standard tax codes – Different tax codes will impact the amount of tax you pay. If you see a different code on your payslip, or have questions about your current one, speak to one of the SG Umbrella team who will be able to help.

SG Umbrella – here to answer all your payslip questions

Got questions about your SG Umbrella payslip? Get in touch! The team are always available to talk you through your payslip, to help you understand how much tax you’ve paid, and what this means for your take home pay.

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In this blog we explore all those points, to help you understand what it means.

Being paid twice

Working under an Umbrella Company means that on occasion, you might be paid twice in any single tax period, due to the way in which some contracts work. But fear not! It’s usually nothing to worry about, as fluctuating and sometimes uncertain payments can be commonplace when contracting.

Even though this understanding is shared by almost all contractors, it may not stop you from thinking that you’ve been taxed twice in the single accounting period. Whilst this may be the case, it’s worth remembering that you’ll only always pay the correct amount of tax, as due to the way in which PAYE works, tax is adjusted based on the amount and timings of your payment.

How does the UK’s PAYE system work?

As an Umbrella Company employee your tax and National Insurance Contributions (NICs) are deducted at source, before you’re paid (just as you would be as a permanent employee). For the correct amount of tax and NICs to be deducted, your employer must calculate how much you owe, and divide this total amount up evenly throughout the tax year.

The tax year runs from the 6^th of April each year to the following April 5^th, and the regularity in which you’re paid will ultimately determine whether your pay can be divided equally between the months of that tax year.

So, for example each tax month runs from the 6^th of the first month to the 5^th of the second, and the tax week begins on the day which the 6^th falls on. Therefore for the next tax year 2025/26 if the 6th of April 2025 is on a Sunday, the tax week will run from a Sunday to a Saturday.

Your Umbrella Company will then use this information to calculate the thresholds and allowances relating to your pay.

What does it mean when you receive two payments in any given ‘one’ tax period?

If you’re a seasoned Umbrella Company worker that’s had a number of contracts and clients, you’ll know that you can be paid either weekly or monthly, and can usually expect to be paid once during that agreed period. Whilst this is usually the case, the following examples may mean you end up being paid more than once:

• If you’re working on multiple contracts with multiple clients and agencies
• If you receive an additional payment as a bonus for example
• If your wages are paid early due to an upcoming holiday, such as a bank holiday
• If your payment is delayed for whatever reason

Whilst being paid early or late can be annoying, it’s always worth remembering that you’ll never be taxed more than you should be, and that it’s a case of timing rather than a mistake being made.

What does this mean for your payslips?

If you do find yourself receiving multiple payments within a singular tax period, you’ll notice that your payslip is slightly different to what you’re used to receiving. But the following information provides an easy-to-understand way of reading your payslip:

Your last payslip in a period – will show the total figures for that particular tax period, which will include the amount that you’ve already received as your salary. This payslip will include all the information you’ll need to understand your pay for that particular tax week or month, including how much tax you’ve paid, etc.

Payment and deduction figures – will be the total amounts for that tax period, including any amounts previously paid to you in that tax period. This is also known as the ‘Net Pay Already Processed’.

The three figures for payments – will be broken down to show you the payments that were made to you post deductions:

1. The total paid to you this particular tax period
2. The total paid in any previous payments
3. The total amount paid to you within this particular payment

SG Umbrella are always here

Understanding your payslip can be confusing, without the added complication of being paid more times than expected. That’s where the expert team here at SG come in! We’re well-rehearsed in all things relating to Umbrella Company contracting, are on hand to offer our support and expertise whenever you need us. From payroll to pensions, holiday pay to tax advice, we’re here to help. Get in touch to find out more.

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In this blog we take a closer look at tax codes to help you understand how they work, and to prevent an unexpected end-of-year tax bill.

Your tax code

It’s your responsibility to understand your tax code and to ensure you’re on the correct one, and you can do so by using the gov.uk website. Whilst your Umbrella Company can offer advice and support with your tax code, they’re unable to amend it for you, only you can do this directly with HMRC.

BR, D0 and D1 codes

If you operate through your Limited Company then accept a contract that’s inside IR35, there’s a chance you’ll be put on a dual employment tax code (also known as a BR code). This would apply 20% tax across all of your earnings, which to be applicable would mean you’d need to be on a day rate of approximately £230, which would also imply that you wouldn’t be taking PAYE earnings from your Limited Company, and therefore dual employment wouldn’t apply. If your income from the Umbrella Company takes you into the 40% category and you remain on the BR code, it’s likely you’ll be receiving a large tax bill at the end of the year.

If you currently have a dual employment code (BR, D0 or D1) then we strongly advise you speak to HMRC to see if it’s your Limited Company showing and you’re not currently taking any PAYE income. In this case HMRC should remove the PAYE employment for the duration of your Umbrella contract. By doing so this should then put you on the correct applicable tax code, and you’ll still be able to draw dividends from your Limited Company, but also remove the PAYE employment.

1257L and 0T codes

Contractors will unlikely be on the standard 1257L tax if they’re paid approx. £500+ per day, if working the full year and not paying into the pension scheme, because their predicted earnings will exceed £100,000, and anything between £100,000 and £125,000 will mean that the personal tax free allowance will drop. Bear in mind that if your assignment doesn’t run for a full 12 months there’s a chance this will not be the case, and this is the time you should update the annualised earnings on your personal tax account.

Your tax code should be a 0T if your earnings exceed £125,000, which will mean you have no entitlement to any tax-free allowance. If at the end of the year you’ve gone through it with a tax-free allowance and your earnings are around that figure, it’s worth checking with HMRC to see if they’re able to adjust your tax code and therefore retain some of your tax-free personal allowance in the second part of the year. So be sure to keep a close eye on your online tax account to ensure your employment details are correct.

The different tax codes and their meanings

1257L – is the standard tax code for 2024/25 and allows £12,570 to be taxed at 0% for that tax year. This is done by using thresholds on a weekly / monthly basis, not once the total threshold has been reached for the year. So for the example of a contractor earning a day rate of approx. £500 working for 12 months, this tax code would be incorrect for them.

BR – All of your income is taxed at 20% without any tax-free allowance. You may be given the BR tax code if HMRC believe you to have dual employment, and that 100% of your tax-free allowance has been used elsewhere. This tax code indicates to HMRC that you have another PAYE employment which may include pension payments on your personal tax account, and therefore we advise you to double check this with HMRC. If left you’ll be classed as a Higher earner and therefore pay 40% tax, which could also earn a higher tax bill later on in the year.

D0 – All of your income will be taxed at 40% without any tax-free allowance. Again worth checking with HMRC though, as the D0 tax code suggests dual employment, and that there is PAYE income elsewhere of over £150,000.

D1 – All of your income will be taxed at 45% without any tax-free allowance. Again worth checking with HMRC though, as the D1 tax code suggests dual employment, and that there is PAYE income elsewhere of over £150,000.

0T – HMRC predicts that your earnings will exceed £125,000, and therefore removes any tax free allowance, and as such 20% and 40% taxes will commence from the first penny of your income.

K code – Is the tax code HMRC gives you when they believe you owe tax. The figure that appears after K is the amount you owe, so for example K123 would mean a figure of £1,230 is subject to extra tax.

T suffix code – Means that HMRC are reviewing your current tax code, and that it may change in the future. This can be quite common for contractors whose income can change from month to month.

X suffix – If your tax code ends with an X your tax will only be calculated on the payment that’s currently being processed, and does not take into account any tax you’ve already paid or not paid in previous periods. It will likely remove any year-to-date earnings, so if you believe this is incorrect you’ll need to contact HMRC to discuss the impact this may have on your personal tax liabilities.

C & S – C if you have a Welsh tax code, and S if you have a Scottish one.

SG Umbrella’s advice

Be sure to check your payslips to ensure your personal tax code is correct. If you’re unsure or need something explained, get in touch with HMRC. You can also check your personal tax account online for answers, and what HMRC have down for your predicted annualised earnings for each of your employments. If you don’t feel as though it’s correct speak with them directly to have any issues resolved.

Whilst the SG Umbrella team are unable to make any tax code amendments for you, we can offer advice and support surrounding tax codes. If in doubt or need some questions answered, speak to the SG Umbrella team.

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Check for FCSA Accreditation

The Freelancer and Contractor Services Association (FCSA) is the UK’s leading membership body dedicated to maintaining and promoting compliance and transparency in the self-employed labour market.

If an Umbrella Company holds up-to-date FCSA accreditation, this proves they have passed the FCSA’s rigorous compliance assessment, and you can be certain that they are meeting the highest standards.

At SG Umbrella, we’re proud to be FCSA accredited and you can view our accreditation page here.

Reputation and Reviews

Getting the authentic views of contractors who have used a specific Umbrella Company is a great way to assess their quality. Speak to your fellow contractors or search the company’s name on a contractor forum to see what people think about them.

If you need to get the overall sense of an Umbrella Company, you can do so through their review pages on sites such as Google and Trustpilot. By reading the real experiences of past and present contractors, you can get a good idea of what the company is like and whether they’re right for you.

If you’re curious about what our clients have to say about us, take a look at our Google and Trustpilot pages.

Offering a Genuine Service

A genuine Umbrella Company should handle PAYE, income tax, and National Insurance Contributions at source. They should also ensure you receive the employment rights you’re entitled to, such as maternity and paternity pay, sickness and holiday pay, and pension contributions.

If an Umbrella Company isn’t genuine and fails to provide a contract of employment, you may not be given the entitlements you deserve.

Compare Pricing

You should always enquire about what’s included in the price. Some Umbrellas may have joining/leaving fees, a minimum contract length or other hidden costs that can dilute what initially seemed to be a great deal. If an Umbrella Company truly cares about their clients and the service they provide, they shouldn’t be ambushing clients with extra charges. When deciding on a company, make sure they will provide the level of service you expect and ensure that you’re happy with the value proposition they’re offering.

Keep in mind that the amounts of income tax, PAYE, and National Insurance Contributions are all decided by HMRC and will be the same for all genuine Umbrella Companies. Any company that claims to be able to increase your take home pay far beyond the level of other companies, is likely not operating legitimately. For more information, you can read our guide on how to spot a non-compliant Umbrella Company.

Payment and Expenses

It’s important that you know how often you’ll receive your payment. The majority of reputable Umbrella Companies will usually process payment a minimum of once a week, meaning you’ll get your money as soon as possible.

You should also become familiar with their expenses system. They should advise you on keeping expenses records in case of an HMRC investigation, and only accept legitimate claims.

Customer-Focused Service

As a busy contractor, you deserve an Umbrella Company that handles your payroll accurately and on time. On top of that, your Umbrella’s team should be able to answer any questions or concerns you may have and offer advice when needed. Quick, effective communication should be a top priority when looking for an Umbrella Company as it removes the headache of trying to chase them up when you need something.

Opportunities to Grow

For many contractors, the long-term plan is to work through a Limited Company, due to the tax benefits they offer. Whether you’re using an Umbrella Company for a specific contract or just starting out in your contracting career with ambitions to grow, you should consider the option of setting up a Limited Company in the future and whether it’s right for you. At SG, we offer both Umbrella Services and Limited Company Accounting, allowing you to easily switch over whenever you need.

How SG Umbrella Can Help You

At SG Umbrella, we’re FCSA accredited and run by experienced contractor accountants, meaning you’re getting the very best service. This includes:

• Fast, reliable payments
• Fixed margin with no hidden fees
• Pay into your preferred pension provider at no extra cost
• Switch over to our Limited Company accounting services at any time
• Expert advice and support

For more information about our services and how we can support your contracting career, get in touch with a member of our team today.

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So if you’ve already taken the leap and invested, do you understand the tax implications? HMRC are quickly realising how much profit people are making, and therefore how much tax money there is to be had. In this blog we take a closer look at crypto, the nudge letters HMRC have been distributing, and what you should do if you receive one.

What are HMRC nudge letters?

Should HMRC have reason to believe you’ve made undisclosed profits on cryptocurrency and therefore owe tax, they may have sent you a nudge letter. In total 8,329 letters have been sent out, and HMRC have been collecting the data from crypto exchanges for the past 3 years.

If you currently own crypto and have previously sold any of your digital assets, you may not be aware that you owe Capital Gains Tax, or if HMRC consider you to be a ‘crypto trader’ then the amount of tax you’ll owe will be significantly more in the form of income tax on your holdings. If you generate interest from ‘staking’ your crypto, mine crypto, receive any amount of airdropped crypto, or trade large amounts on a regular basis, you may be subject to paying tax.

Since 2022 it’s predicted that 4.97 million people in the UK own some form of cryptocurrency, so it’s well worth HMRC’s time to start investigating further.

What do the letters say?

The letter will either indicate that you currently, or have previously held cryptoassets. The following three instances may indicate that a taxable gain has occurred:

1. If you currently are / or have traded cryptocurrency in the past – i.e. you’ve sold your crypto assets for a higher value then you originally purchased it for
2. If you swap your current form of cryptocurrency for another
3. If you use your cryptocurrency to purchase something

These three points are all examples of crypto disposals. Point 1 is a traditional disposal, whereas points 2 and 3 are examples where HMRC want to increase awareness. It’s considered that cryptocurrency has been sold at the point at which a transaction has taken place, and therefore either more cryptocurrency has been accrued, or something has been purchased by the owner. The Capital Gains Tax rule would apply to both scenarios.

How much tax is therefore due?

Receiving a nudge letter won’t mean you automatically owe tax, but it is worth considering if you need to report your gains and losses to HMRC. The Capital Gains annual exemption for the current tax year (2023/24) is £6,000, which will be reduced to £3,000 for the 2024/25 tax year. Should your net gain exceed this amount, you’ll need to report this to HMRC via your self-assessment tax return. If your proceeds exceed £50,000 and your gains are still below the annual exemption amount, you’ll still need to report it to HMRC.

At SG our cryptocurrency experts will be able to look at the big picture, and advise you on what action you need to take in order to stay on the right side of the taxman. For more information on whether you owe tax on your cryptocurrency, take a look at our sister company SG Accounting’s blog or get in touch with our team.

What’s the next step?

It’s predicted that the next step will be HMRC sending out enquiry letters, which will request greater detail from yourself regarding your cryptocurrency holdings. Whilst it might be tempting to withhold this information, with HMRC’s access to data becoming greater and greater, it’ll become harder to hide from them.

Tax evasion is treated extremely seriously by HMRC, and anyone claiming to not understand their tax responsibilities on their crypto moving forward can expect the usual heavy fines and unpaid tax bills.

How can SG Umbrella help?

SG’s team of accountants are one of the few in the UK who are able to offer exclusive access to crypto tax experts, so whether you’ve invested in the past, currently hold investments, or are thinking about it in the future, get in touch with us.

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In this blog we explore the benefits of using an Umbrella Company, and how it can benefit you.

What is an Umbrella Company?

An Umbrella Company is a company which provides an overarching contract between yourself (the contractor) and the client / end hirer. The Umbrella Company handles all of your administrative tasks such as paying tax correctly and on time, National Insurance Contributions (NICs), other deductions by law and payroll, and ensures all your tax owed to HMRC is correct and paid on time. The Umbrella Company will invoice your client on your behalf, then pay you once PAYE costs and their fee has been deducted. When you enlist the services of an Umbrella Company you effectively become their employee.

Employee benefits

When you use an umbrella your wages will be paid via PAYE, meaning that you also get all the benefits of being employed, which include maternity and paternity pay, sickness and holiday pay and pension contributions.

Pensions

Since the introduction of the Pension Auto Enrolment Scheme in 2012, every employee aged over 22 that earns more than £10,000 per year within the UK will automatically be enrolled into the scheme. As an employee of an Umbrella Company you’ll also be auto enrolled, and will have to opt-out if you don’t wish to use it. You also have the option to continue to pay into your private pension, which here at SG Umbrella we don’t charge you extra for.

IR35 stress-free

IR35 is a piece of tax legislation designed to identify those who claim to be self-employed (and therefore have access to the tax benefits which are only available to those who are truly self-employed) who are in fact employed, and therefore not entitled to the same benefits. When you contract using a Limited Company your IR35 status is determined by the client / end hirer, so the decision is completely out of your hands. This is one reason why a lot of end clients decide not to work with Limited Company contractors, as they’re concerned that if they get someone’s status wrong, they’ll be financially liable for their tax and any fines due. By using an Umbrella Company you’re eliminating this risk, and therefore may seem more attractive to end hirers / clients.

When using an Umbrella Company you’re paying your tax and National Insurance through PAYE, which is deducted before you even get paid (similar to how you might’ve been paid when in permanent employment) and so you don’t need to worry about your IR35 status.

Minimal management

When you become an employee of an Umbrella Company you pay a weekly or monthly fee, which covers all your management. This will typically include the following:

• Handling and processing your PAYE
• Liaising with your end hirer / client to ensure you’re paid, and that it’s the correct amount
• Providing employee rights
• Providing financial advice and support (unlike SG Umbrella, not all do)
• Pay into your pension (with SG you can pay into your preferred private pension at no extra cost)

You’ll also receive your payslip, which will show your tax deductions, pension payments, and the umbrella’s management fee. Your wage will then be paid directly into your bank account. It’s as simple as that!

New to contracting?

If you’re just starting out or don’t want the commitment of forming your own Limited Company, then using an Umbrella Company can be the perfect option for you. If you’re between permanent jobs, have shorter contracts, are testing the waters, or simply just want to try something new without leaving the safety net that comes with being an employee, then umbrella contracting could be the perfect solution for your current situation.

How SG Umbrella can help

If you’re new to the world of contracting and are considering an Umbrella Company, we can help. Run by experienced contractor accountants, and backed by the FCSA (Freelancer & Contractor Services Association), we can advise you on setup and help you make the most tax efficient decisions. Get in touch today to find out more about SG Umbrella.

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