Breaking the tax code can be one of the most difficult elements when contracting.  It can go up, it can go down and more often than not it will leave you confused.

As a contractor completing various shifts at various rates you may find that your tax code can change. From one week to the next the amount you earn can vary and as a reflection of this HMRC can increase or decrease your tax code.

For instance: a contractor earns £300 one week and then £500 the following week. Based on this HMRC may predict that your wage has gone up and that going forwards £500 is now your standard. This will mean your tax code will change and a higher rate of contributions will be deducted.

If the amount you earn goes down the week after then your tax code should change to reflect this. Any over payment will be recovered in your tax code meaning you may pay less tax one week followed by an increase.

This means life as a contractor can be confusing if the amount of work and rates you earn fluctuate.  It can be hard to understand what is the correct amount of tax and deductions you should be paying.

Your Umbrella has no control over your tax code and they can not get it changed for you, and nor are they responsible for the change in the first place.  If you are in doubt over the amount of tax you are paying you should contact HMRC directly as only they can rectify it.

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