Reasons Your Net Pay Might Differ from a Take-home Pay Illustration

31 March 2023

It is important to remember that net pay illustrations are often based on assumed information. We do our best to be as accurate as possible, but in some cases, we do not have all the information, like your tax code or previous income.

We’ve designed our calculator to be as comprehensive as possible, but there will always be cases where something is missing. In this case, our business managers are happy to discuss your circumstances and provide an exact calculation if you contact them.

Your Tax Code

An incorrect tax code used for the illustration can affect the results significantly. We won’t know your tax code until you send us your records (P45, P60, etc.). The tax code you think you are on may also be incorrect if your previous employer failed to update your records.

Some umbrella companies will alter the tax code to give you a higher take-home pay figure. At SmartWork, we work with a standard tax code 1257L that gives you a £12,570 personal allowance (2024/25).

In our calculator, you can adjust your tax code if you know what it is. If you are a Scottish taxpayer, please let us know, as this can also alter your results.

Missing P45/P60 Form

You may notice a significantly lower take-home pay if we haven’t received your P45 from your previous employer or the P60 form if SmartWork is your first employer in the tax year. In this case, we have to put you on an emergency tax code that will result in a higher tax deduction. Don’t worry; once we have the correct tax code, the extra tax paid will be recovered in the subsequent months’ payroll.

Weekly or monthly illustrations

Your net pay calculation may show 48 or 52 working weeks, depending on your weekly or monthly payment frequency. In a monthly illustration, we calculate the average working days to be 20 days per month, so if you work less or more, that will result in your net pay being slightly different. On the other hand, the weekly take-home pay illustration is based on 48 working weeks, taking into account bank holidays and time off work.

Your annual earnings

Umbrella pay illustrations are based on an annual income as in the whole tax year on that specific contract. As a contractor, your agreement may not last the entire 12 months; you may take time off, go on a holiday, etc., affecting your net take-home pay.

HMRC will assume that your contract rate is what you’ll earn for the entire tax year. For this reason, if you stop working early in the year, you may find that you have been deducted too much tax. This can be recovered at the end of the year.

Holiday Pay

Most umbrella companies will pay for your holidays in advance, meaning they’re included in your pay. If you choose to have your holiday pay accrued, it is retained for a later withdrawal. The overall effect on your net pay will be evident as it will miss the additional payment in your pay.

Pension deductions

The Government requires every employer to enrol employees into a pension scheme after 12 weeks. You can opt-out, but if you don’t, this will show in your net pay as it decreases in line with the deductions made.

Most umbrella companies leave pensions out of their illustrations as most contractors opt-out, and it shows a higher net take-home pay, which looks better. At SmartWork, we included a column showing how Auto-enrolment will impact your net pay.


Like pension deductions, most umbrella companies will go for a better-looking net pay by including expenses in their illustration, even though not everyone can claim. Again, we designed our calculator for transparency so you can see your net pay with or without expenses and know what you can expect.


It is important to note that the same employment laws bind all umbrella companies and must deduct the same tax and NI percentages. Their quotes should only differ by the amount their margin varies.

How can SmartWork help?

We believe in transparency, which is why our calculator is one of the most comprehensive ones out there. Multiple variables can be changed to get the best result, which you can download for yourself. No, we won’t ask for your details to do that.

If you prefer to speak to one of our business managers, e-mail us at, call 0800 434 6446 or request a callback here. They will happily review the details with you and provide a personalised illustration.

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