New Public Sector Rules – take-home pay Calculation question – One for the accountant

[tarbera]

No, as we discussed when you last posted that question in October / November....

In other news new end client had 2 departments ring up looking for support.... - I think the going rate will be 4 times the rate contractors charge.

I was hoping an accountant type would answer my question. As yet no answers here or Ipse

[fannyadams]

Expenses will come out of net pay, hence my question, it is worth working for PS if you have high expenses

Not if you're going to ride donkeys instead of invoicing.

Your post is a bit confusing - your (hypothetical?) contract is in London (hence the flat) and home is elsewhere?

[pr1]

I don't know how the expenses are going to work, but the tax is to expect 65% of day rate as per umbrellas.

You need to include accountant fees in your expense calculations, but I would consider them the same as umbrella fees (i.e. part of the 45% tax & fees)

Will expenses even be allowed?

what's 65% + 45%?

[Fred Bloggs]

what's 65% + 45%?

It's the all new, 100% risk free guaranteed, 100% HMRC approved take home 110% Cojak umbrella scheme. Everyone is doing it. You're not in the scheme, what could possibly go wrong, it's HMRC approved and risk free guaranteed?

[LondonManc]

It's the all new, 100% risk free guaranteed, 100% HMRC approved take home 110% Cojak umbrella scheme. Everyone is doing it. You're not in the scheme, what could possibly go wrong, it's HMRC approved and risk free guaranteed?

"You give the extra at work, you take it with you."

[tarbera]

New Public Sector Rules – take-home pay Calculation question – One for the ac...

Not if you're going to ride donkeys instead of invoicing.

Your post is a bit confusing - your (hypothetical?) contract is in London (hence the flat) and home is elsewhere?

Flat in London, home and family in Glasgow where I travel from each week

Several contractors will do the same thing

Hotel expenses are are lot more than a flat

[Cirrus]

Butlin's is out I'm afraid

I work 20 days then Invoice for £10K + £2K Vat
Expenses = Flat + other = £3600

What is my net gain for working those 20 days (180 hours or work) after expenses and tax

One of the calculators said £63500 net, so £4871 for the 20 days. Take off £3600 and you're just about on minimum wage

[LondonManc]

Nearly as cheerful as realising that a £500/day contractor will get £1 per day for collecting VAT instead of £13/day currently.

[doconline]

Say I have a 52 week Contract starting 10th April 2017 with HMRC – I will definitely be IR35 Caught

Daily Rate = £500 – 5 days a week – 9 hour days
No pension Contributions
Vat Registered (standard not Flat rate)
I work away from home and have a London flat that costs £500 per week (have to pay if I am in London or on Holiday or at home)
Other Expenses are £400 a week (Travel + Food etc) – Only pay this out when working (not when on Holiday)
Ignore all other business expenses (accountants, Insurance etc)
Assume already a higher rate taxpayer
Remove VAT if makes calculations simpler as neutral

Question 1

I work 20 days then Invoice for £10K + £2K Vat
Expenses = Flat + other = £3600

What is my net gain for working those 20days (180 hours or work) after expenses and tax

Question 2
I work 10 days (I went off to butlins to ride some donkeys for 10 days) = £5K + £1K Vat
Expenses = Flat + other = £2800

What is my net gain for working those 10days (90 hours of work) after expenses and tax


Thanks in Advance (assume I don’t have an accountant to ask @copyright NLUK)

If you take a look at https://listentotaxman.com/120000? this will give you very rough figures. I have left off VAT for ease of calculation, as with the new flat rate scheme changes, it won't change the figures very much anyway. This is if you bill 20 days per month on average and don't pay into a pension. This does not include any umbrella fees etc and uses figures for 2016/2017.

Answer to Q1 - Not including employer NI (£1300), you are looking at ~£6100 per month. Taking off employer NI £4800 per month.

Using the above figures and changing the amount to £60k (average of 10 days per month for 12 months)

Answer to Q2 - Not including employer NI (£600), you are looking at ~£3500 per month. Taking off employer NI £2900 per month.

These figures are very rough and may differ based on the a mount of tax already paid during the year, but both figures used will put you into the higher tax bracket threshold so will be reasonably accurate.

You need to bill an average ~13 days per month to break even on you expenses alone, before your household bills etc.

You'd need a 50% increase in your rate and bill 20 days per month on average to make £3k per month after tax and expenses.

Hope this helps and IANAA, so treat figures with large pinch of salt

[chopper]

Answer to Q1 - Not including employer NI (£1300), you are looking at ~£6100 per month. Taking off employer NI £4800 per month.

Actually..

£10,000 monthly invoice would made up of
Employer NICs : £1130.68
Taxable Income : £8869.32

Of that taxable income, £2754.93 would be Tax, £455.12 would be Employee NICs, leaving £5659.27.

I think you made the mistake of deducting tax and employee NICs from the 10,000 rather than the after employer NICs amount.

Still, with no relief on expenses, the £3600 comes out of the £5660, leaving £2060 at the end of it.

Which doesn't sound worth the hassle of contracting.

The new PS rules pretty much mean either you take a rate 25%-50% higher than before the new rules, or you work local to where you live.