The Gabem Umbrella Companies Blog:
Home of Umbrella Company Gossip Online

One of the things I talked about last time were the changes to PAYE taxation that being introduced. What I didn't spend much time talking about were the new tax codes. Tax codes are something any employee has to be familiar with regardless of whether they work though an umbrella company or not. Every year there are "new" ones, this years new "standard" tax code is 747L (last years was 647L), but this year brings us an actual new tax code. The tax code in question is the 0T tax code.

We hear a lot of talk about what is often referred to as "emergency tax" which has traditionally been the BR week 1 tax code which applied a 20% tax to all your earnings regardless of any allowances. 0T takes this one step further and rather than apply a flat rate of tax applies each band of tax all the way up to the 50% band whilst also applying no allowances, making anyone on it potentially even worse off.

One of the key times it will be used (and this is of particular importance to people switching to umbrella companies) is if you don't have an actionable P45 and you don't fill out a P46 instead, when you change employers. So if your previous employer, whether they are an umbrella company or not doesn't issue you a P45 (and they really should), it is now more important than ever that you fill out a P46 so that you avoid the 0T tax code.

I realise I've made that all seem quite intimidating, but for the majority of you this is going to have next to no impact at all. It will mainly effect people changing employers (so people switching between umbrella companies or between agents and umbrella companies), and is actually fairly simple to avoid if that is the case, just fill out a P45 or a P46. It's just one more piece of paperwork you need to be on top of.

Hugo
@GabemUmbrella
19/04/2011