Umbrella company calculation

Umbrella company calculation

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Hi, this is more of a mathematical question initially, but I also want to get the info on to a spreadsheet as well.

Below is the breakdown of an example salary payment paid through an umbrella company;

a)Gross Pay £500.00

b)Taxable expenses -£115.00

c)Employers NI -£27.53

d)Umbrella Co Margin -£22.00

e)Adjusted Gross £335.47

f)Tax -£38.20

g)NI -£23.58

h)Add back expenses £115.00

i)Net pay £388.70

My question is.... the employers NI (c) is calculated dependent on the adjusted gross (e), but the adjusted gross is arrived at using (a) - (b) - (c) - (d).  How is this worked out, I assume it is by a calculated sum? rather than trial and error to see which two numbers eventually fit?!

And if someone could be even kinder as to explain how I can get this info into excel so that when I change the gross pay, the rest just works itself out.

Thank you in advance. 

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By cedar.financial
24th Jan 2012 10:11

Split the calculation

You need to do the calculation in two parts.

 

Firstly, Take the Gross Pay and deduct taxable expenses and the unmbrella company margin.  This leaves you with a subtotal (A) which represents the Adjusted Gross plus the Employer's NI. 

 

Assuming that the taxable expenses are also deductible for NI purposes then you can now calculate the Adjusted gross (G) from A using the following formula:

 

G = (A + 18.768) / 1.138

 

It should now be straightforward for you to rework your spreadhseet, using the above formula.

Thanks (1)
Replying to lionofludesch:
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By Norts1985
01st Feb 2012 16:16

Thank you very much, works perfect every time

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By d_doyle
18th Feb 2014 10:15

Umbrella calculation

where does the 18.768 come from ?

 

Thanks

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