Take home when earning 400/day

[rurffy]

Guy please what is your take home if you get a gig of 400 quid/day . I have used some online calculator and they seem so unrealistic. So i would like real life experience and figures. Lets assume i am NOT contracting in the public sector.

Thanks

[stek]

Depends if you wanna take the lot as income or take the optimum for lowest tax and warchest building

[Lance]

depends on expenses

[northernladuk]

Depends. What are your expenses going to be like?

Why exactly do you want to know? Just the take home as the only decision point as to whether you go contracting is not the best approach. Or do you just want to know how much Filthy cash you are going to make?

[TheFaQQer]

£400 a day could result in as little as £0 a day take home - it depends what your company does with the money. If you don't pay it out then your take home is nothing. If the business runs up expenses of £410 a day then you end up with no money in the business either.

The maximum you could take home would be £400, on the assumption that you don't bother putting money aside to pay your corporation tax or any other expenses, which would put you in trouble when the faeces makes contact with the rotating air distribution device.

So - somewhere between £0 and £400.

[rurffy]

£400 a day could result in as little as £0 a day take home - it depends what your company does with the money. If you don't pay it out then your take home is nothing. If the business runs up expenses of £410 a day then you end up with no money in the business either.

The maximum you could take home would be £400, on the assumption that you don't bother putting money aside to pay your corporation tax or any other expenses, which would put you in trouble when the faeces makes contact with the rotating air distribution device.

So - somewhere between £0 and £400.

Thanks for making it complicated! im lost now!

[rurffy]

Depends. What are your expenses going to be like?

Why exactly do you want to know? Just the take home as the only decision point as to whether you go contracting is not the best approach. Or do you just want to know how much Filthy cash you are going to make?

So i want to know the monthly money in my bank after them TAX and all. assuming my expenses is 800/month

[TheFaQQer]

Inside or outside IR35?

[tomtomagain]

So i want to know the monthly money in my bank after them TAX and all. assuming my expenses is 800/month

As a very rough rule of thumb I'd work on the assumption that you keep 65%

If you have a bit more then your accountant will tell you at your year end.

[WordIsBond]

Ok, I'll show you how to figure it.

First let's assume 18 days a month. Some months you'll have more, others less, if you take a week holiday, say. If you think you are going to work more than 18 days, change that number.

18x£400 = £7200 average monthly revenue.

£800 expenses, gives you £6400 monthly profit before salary or tax.

You can pay yourself £680 / month without any National Insurance liability. So do that, it reduces your corporation tax. If you pay yourself more salary, it will cost you more tax.

So now you have £5720 monthly profit. Corporation tax on that is £1087. That amount goes into a business savings account, it's untouchable, you are going to need it later. Now, your company has £4633.

Assuming you have no other income, you get the personal allowance plus the dividend allowance before paying any tax on dividends. That's £16500, or £1375 / month. So having paid £680 salary, you can give yourself a £695 dividend without any tax hit. You're now at £1375 take home, with no tax hit, and your company still has £3938.

Unless you are in Scotland, you have £45K in the basic rate band. That's £3750 / month. But you've already taken £1375, so you can take another £2375 in dividend, in the basic rate band. That will be taxed at 7.5% dividend tax, so will cost you £178 / month, so your take home out of that basic rate band dividend is £2197.

You've now taken £3750 out, at a tax cost of £178, for a take home of £3572. Your company still has £1663. You can retain this in the company for a reserve in case you have a time where you are out of contract, or when you just decide to take a month or two off to go pretend to be rich. Or, you can pay yourself the rest in dividends. If you pay yourself the rest, you'll pay dividend tax of 32.5%, since you are now in higher rate band. That will cost you £540, but you take home another £1123. So now you have a total take home of £4695.

That's 65% of your original £7200, but that's probably not the best way to calculate it. If the £800 / month expenses are real, then that means you never really should have included them, in calculating your percentage. You aren't really looking at £7200, you are looking at £6400 a month. So you are taking home about 73% of your £6400 operating profit.

If you can live comfortably without going into higher rate band tax, most people would say it probably makes more sense to retain the last £1663 in the company, at least until you've got a nice reserve built up for down time. These percentages are based on the assumption that you'd pay that out in dividends, rather than retain it.