Budget\Calculate monthly for PAYE & Corporation Tax (spreadsheet)

[aoxomoxoa]

WHS.

Not with brainless thinking as has been shown so far. Better budget for 4 days pa....

To be (perhaps unduly) fair to the OP I think the number of billable days per month stated is intended to illustrate the logic behind the calculation rather than to be an actual business plan. At least I hope so.

[northernladuk]

I smell a serious **** up on the horizon for this OP..

I got hit with a massive tax bill for PAYE

Ohh...

Seriously though. Give up with all these stupid (and incorrect) assumptions and numbers simplified for clarity. This is how you get yourself in a mess...

Nothing we say or you suggest is going to get you out of your pickle. The devil is most definitely in the detail so go get the details right.

Get your hand in your pocket, get yourself FreeAgent and sleep soundly (and a lot better off) at night.

[fidot]

rule of thumb calculation for Corporation Tax

The simplest rule of thumb calculation for Corporation Tax liability is to put aside 20% of your invoice values.

HTH
Terry

[JRCT]

WTF???

What the hell kind of phone / broadband speed do you get for £150 of business expenditure every month???

That's a mobile home

[robz8701]

Does make me laugh the arrogance and rudeness of some people who reply.

As stated I came into an issue the last financial year with my newly assigned accountant, no issues before that.

If I knew how to understand all this I'd do it myself and wouldn't have an accountant. I was just asking honest questions FFS

Just be good to have estimates based on working every available week in the year. Appreciate it may not pan out that way but hopefully you can understand this from my viewpoint.

I have taken on board the advice and will ensure I have conversations with my accountant.

I'm sure with all the right info I can create something which allows me to budget showing what dividends I can take and what provisions need to be made for the relevant taxes applicable

[JRCT]

Does make me laugh the arrogance and rudeness of some people who reply.

As stated I came into an issue the last financial year with my newly assigned accountant, no issues before that.

If I knew how to understand all this I'd do it myself and wouldn't have an accountant. I was just asking honest questions FFS

Just be good to have estimates based on working every available week in the year. Appreciate it may not pan out that way but hopefully you can understand this from my viewpoint.

I have taken on board the advice and will ensure I have conversations with my accountant.

I'm sure with all the right info I can create something which allows me to budget showing what dividends I can take and what provisions need to be made for the relevant taxes applicable

You haven't mentioned salary at all in your calculations. Are you paying yourself a tax free salary?


Based on your numbers, a very rough calculation (assuming you work 260 days per year):

Income (incl. VAT) - £85,800
VAT to pay - £12,441
Expenses to pay - £9,456 (your figs, including £150 a month for a mobile (?) but not the PAYE that you state)
Corp Tax to pay - £12,781
Money left to pay salary and divs - £51k

Salary - £10k tax free
Divs - £32k (effectively) tax free

£9k to leave in the ltd account or pay divs at the higher tax rate.

That took about 4 minutes to work out. I don't understand why you seem to think you have a massive PAYE to pay.

[aoxomoxoa]

That took about 4 minutes to work out. I don't understand why you seem to think you have a massive PAYE to pay.

I think the OP meant salary, but called it PAYE.

[rob s]

Useful stuff in this thread as I've been trying to make sure I understand it as well. I do have freeagent, but I like knowing the workings behind it.

I've only just switched to ltd from brolly, so not using payroll for the last months this year and dividend only, so my simplified assumption for calculation right now is:

Receive invoice amount + VAT
Ignore VAT
Pay myself expenses
Deduct 20% CT
Remainder is max dividend I can pay (of which 25% needs to be kept aside for SA)

Have I got this right?

[robz8701]

Yes apologies as I'm getting confused with PAYE & self assessment ie tax I have to pay personally on dividends withdrawn.

The part I find confusing is why am I advised to take dividends so that I don't pay higher tax? If I'm not going to utilise the limited company to maximise my income contracting I don't see the point?

I really don't get this statement of "only withdraw what you need" and leave the rest in the business account so it can be withdrawn at a later time? What's the point? I may as well go back to permanent and earn more money? Naive possibly but if I'm earning more surely I take higher dividends and pay the tax required?

Problem with a lot of this is nobody seems to want to work based on scenarios or plan for a month by month budget taking into account tax provision over the whole year.

Surely I'm not the only IT contractor who thinks like this?

[aoxomoxoa]

Useful stuff in this thread as I've been trying to make sure I understand it as well. I do have freeagent, but I like knowing the workings behind it.

I've only just switched to ltd from brolly, so not using payroll for the last months this year and dividend only, so my simplified assumption for calculation right now is:

Receive invoice amount + VAT
Ignore VAT
Pay myself expenses
Deduct 20% CT
Remainder is max dividend I can pay (of which 25% needs to be kept aside for SA)

Have I got this right?

Don't forget other company expenses before you calculate CT. For example salary to yourself, accountancy fees, PI insurance, computing kit, and contribution to your pension.

When you pay dividend from company you need to gross it up to determine what gets declared on your SA.