Receiving Multiple Payments in One Tax Period

Managing Multiple Payments: What You Need to Know

Hey there! Let’s make sense of those times when you get paid more than once in the same tax period as an umbrella company contractor. This situation can feel confusing, especially when you notice a difference in your take-home pay. Don’t worry — you’re not alone, and we’re here to explain everything in plain English.

Understanding the Basics: What is a Tax Period?

A 'tax period' is simply the period your umbrella company uses to process your pay, following HMRC guidelines. You might be paid weekly or monthly:

• Monthly: Runs from the 6th of one month to the 5th of the next.
• Weekly: Starts on the day of the week the new tax year (April 6th) falls on, and continues each week after.

Whenever you’re paid, your payslip will have your pay, tax and National Insurance calculated just as it would be with any employer. Want to see how this works in real detail? Check out our handy [payslip guide](https://www.contractor.news/articles/breaking-down-your-umbrella-reconciliation-statement-and-payslip).

Why Might You Get Paid More Than Once in One Tax Period?

It’s more common than you think! Here’s why it might happen:
• You’re working with several clients at once.
• You started or finished a contract mid-period.
• You were paid early because of a bank holiday or festive break.
• You sent in a timesheet late, causing two payments to overlap.
• The occasional human error.

All these are normal and usually nothing to worry about.

Do You Need to Do Anything?

In most cases — relax! There’s usually nothing you need to do. However, if you have doubts or spot something odd on your payslip, it’s always a good move to ask your umbrella company for clarity.

Our expert team is always happy to help!

How Does This Impact Your Tax?

This is where it gets interesting. Here’s what happens, step by step:

1. First Payment:

• Your personal allowance is applied first, giving you the maximum tax-free income. Tax is then calculated using the 20% and 40% thresholds as needed.
2. Second Payment in Same Period:
• Payroll systems combine the two payments, treating them as a single, larger sum. This means much of your income could spill into the higher tax bands (40% or even 45%) since your allowance was already used up on the first payment.

The result: Your net pay on the second run could look lower than expected, as more of it is taxed at higher rates.

Don’t panic! Over the course of the tax year, the system usually lines everything up, but:

If you’re on a 'W1' (Week 1) or 'M1' (Month 1) tax code, each period stands alone. Payroll won’t adjust for previous payments, so things may not "even out" until you receive a tax review or do a Self Assessment.

If you are unsure why you are on a W1/M1 tax code, please contact HMRC on 0300 200 3300 to query it further.

Top Tips for Contractors

• Keep records of your payslips and payment dates.
• Watch out for unusual deductions and ask questions if anything looks strange.
• Get familiar with your tax code (W1/M1 can make a difference).
• If you have ongoing multiple contracts or varied payments, a chat with your umbrella company or a tax professional is always a good idea.

What Next?

We know contracts aren’t always predictable, and your pay may vary. If you’ve received multiple payments and want a breakdown, or if you’re just curious about how umbrella payroll works, reach out to your umbrella customer care team.

Stay in touch, stay informed, and keep those payslips handy!