Working out an Annual Salary

[YahooSerious]

Hello,

I have seen a contract locally for £275 a day and am tempted to look into contracting as a way of life. I appreciate I need a good accountant and to such before taking the leap. But I wondered what an approximate, indicative gross annual salary would be for such a daily rate? This website tells me £66,000 per annum: Free Annual Salary Calculator | Pinnacle Accounting and Tax

Is this safe to rely on or is it missing subtleties. Again, just looking for some indications as I'd never take the leap without proper accounting advice. Thanks!

[PerfectStorm]

About 72K according to this site https://www.nixonwilliams.com/contra...calculator.asp

Not bad eh!

[Jessica@WhiteFieldTax]

Well, putting in £200 daily rate (test: easy figures) gives an answer of £48,000 which is £200 x 5 days x 48 weeks.

This doesn't seem that sophisticated to me, but I'm not sure what it's trying to show in any event.

I'm also not sure what question you are asking? Working out your annual gross income from £275/day is simple maths and assumption about how many weeks you work.

But did you mean to ask about how £275 / day contract compares to permie? Different question.

[Jessica@WhiteFieldTax]

About 72K according to this site https://www.nixonwilliams.com/contra...calculator.asp

Not bad eh!

Looks like a better and more robust calculator

[jamesbrown]

All of the above calculations are wildly optimistic. If you want to understand why, try a basic search. This question has been done to death, revived, killed, murdered, and buried. Twice.

[DannyF1966]

Is this safe to rely on or is it missing subtleties.

Nothing is safe to rely on, there are so many factors involved. The day rate looks attractive but it's got to compensate for the days when you're not working, either because you're taking a holiday, off sick, or in between contracts. You have to pay accountants fees (well, you could do it all yourself but it's a bit of a minefield), your income will depend on how much you want to split between salary/dividends, whether you want to stay under the higher rate tax bracket or not, how much expenses you can claim for travel, etc etc

It's very much a "how long is a piece of string" question and you won't know your actual annual income until your end of year accounts have been prepared, and even then it's be different for every year.

As a rough guess? Anything between the online calculators as an over-the-top figure and, I don't know, maybe 20-30% of that?

[TheFaQQer]

All of the above calculations are wildly optimistic. If you want to understand why, try a basic search. This question has been done to death, revived, killed, murdered, and buried. Twice.

This.

For example, the Nixon Williams calculator says that it does not include any expenses other than their fees, which is pretty unrealistic.

The also assume that you will take all the money out, leaving nothing for any downtime. Whilst this is possible, I really wouldn't recommend it.

[malvolio]

In terms of eventual net take home, £275 is very roughly equivalent to a £34k permie salary.

HTH...

[psychocandy]

How long is a piece of string?

Depends on:-

1) How many weeks in the year you end up working.
2) How much travel to client is involved can make a big difference to expenses.
3) Whether you're inside or outside IR35
4) Whether you choose to pay a low salary hugh dividends
5) Whether you have a wife/husband you are willing to split dividends
6) Whether wife/husbands own tax situation makes previous worthwhile.

[TheFaQQer]

4) Whether you choose to pay a low salary hugh dividends

Maybe you'd have more money if you stopped paying Hugh dividends?