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Umbrella Company Employees: Getting Paid Twice in a Tax Period

Because of the way contractors work, umbrella company employees are sometimes paid more than once in a single tax period and this can make your payslips more complicated to read. In this article we’ll look in detail at the situation, so you’re prepared when and if it happens.

Why none of this is anything to worry about

Variable and sometimes unpredictable payments are an ordinary part of contracting, and when more than one payment falls in the same tax period, it doesn’t usually mean there’s a problem.

The biggest concern most employees have when they receive multiple payments is that it might result in their paying more tax. Because of the way the UK PAYE system works, your tax is adjusted each time you’re paid, so you will always pay the right amount of tax overall.

What we mean by “tax period”

All UK employees, including those who are employed by an umbrella company, are paid through the UK PAYE system. This means tax and National Insurance Contributions (NICs) are deducted from each payment as you go along, so you don’t have to pay separately at the end of the year.

To allow your employer to calculate your pay correctly, allowances for income tax, national insurance and some other deductions must be divided up equally throughout the year.

Depending on your pay frequency, the tax year (6th April to 5th April) can be split into monthly or weekly periods.

  • Tax months run from the 6th of one month to the 5th of the following month. For example, the first tax month each year runs from 6th April to 5th May.

  • The tax week starts from whichever day the 6th April falls on that year. For example, the 6th April 2023 was a Thursday, so in tax year 2023/24 the tax week runs from Thursday to Wednesday.

This allows your employer to use the correct thresholds and allowances for your pay frequency, for example using weekly thresholds when you’re paid weekly.

Why umbrella company employees might receive more than one payment in a tax period

Most assignments will set your pay frequency as monthly or weekly, depending on the arrangement between umbrella and agency, and usually you would expect to be paid once in each period. However, there are a few situations that could lead you to be paid more than once:

  • If you work on more than one assignment at the same time for different agencies or clients

  • A delayed payment, for example if a timesheet is completed or signed off later than usual

  • An early payment, for example to ensure you’re paid before a bank holiday

  • An additional payment, for example paying a bonus for hitting a project milestone

These are just examples, and there may be other causes too. The main thing to remember is that, even though it’s an unusual situation, it doesn’t mean something has gone wrong.

How multiple payments affect your payslips

Receiving more than one payment in a single tax period can make your payslips slightly more complicated, but they’re still relatively simple once you know how to read them.

Your last payslip in a period supersedes the others

The last payslip you receive in a period will show the total figures for that period, including any amounts that you’ve already been paid. All the information you need to understand your pay for that tax week/month is on that one payslip.

All the figures are the totals for the period

The figures for payments and deductions will be the totals for the tax period. There will also be a deduction for the amount we've already paid you in this tax period. This will be called "Net Pay Already Processed".

The amounts paid to you will be broken down

Typically, there will be three figures for payments being made to you after deductions:

  • The total amount paid to you in this tax period

  • The amount already paid in previous payments

  • The amount being paid to you in this payment

If you have questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com

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