Percentage take home retention rates - do they differ based on the accountancy firm?

[ECommerceConsultant]

LTD company Contractor accounting question
I've been contracting for a long time, but I've used an umbrella company, as I didn't want the extra paper work outside of work. I am now going to do the limited company set up for the first time, so it's all completely new to me. I've searched on here, and found some recommended contractor accountants, and spoken to them. Retention rates don't seem all that great, many around 65%, when in some other forum threads, contractors are saying they get 82% take home retention rates.

Questions:
1) I'm just wondering - there are so many different accounting companies out there - are they all the same in the terms of the percentage returns you can get - and they only differ in terms of cost per month, competency, and reliability?

2) Or are there differences in the take home pay retention rate you can expect from the different accountants?

3) Is 82% achievable? or is 65% more realistic?

Thanks in advance.

[Maslins]

Retention rates without further detail are BS.

You can get 100% take home...as long as you invoice <£8k/year and have no other personal income. 82% is probably plausible for someone invoicing maybe £40k or something. For those invoicing more like £100k and wanting to extract most of it, they might end up with less than 65%.

Your company pays tax based on its profit. You personally pay tax based on your personal income (largely the salary/dividends you draw from the company). No accountant can magically alter those.

So to answer your questions, I'd suggest:
1) yes.
2) no.
3) see my comments above. Biggest variable will be earnings. Other significant variables will be things like level of pension contributions, do you have a low earning spouse to share dividends with, are you happy leaving some profits in the company rather than extracting max divis.

[ladymuck]

Did any of the firms give you an illustration?

[northernladuk]

LTD company Contractor accounting question
Retention rates don't seem all that great, many around 65%, when in some other forum threads, contractors are saying they get 82% take home retention rates.

Really? I find that very hard to believe bearing in mind Corp tax is more than that alone. Care to link some of them?

Questions:
1) I'm just wondering - there are so many different accounting companies out there - are they all the same in the terms of the percentage returns you can get - and they only differ in terms of cost per month, competency, and reliability?

They prepare your tax returns as per tax law. It's the same law regardless of accountant so they can't change between accountants. They only thing thst might change is some of the things you claim on with some accountants playing by the book and others letting things go thst are questionable.

2) Or are there differences in the take home pay retention rate you can expect from the different accountants?

Flat no.

3) Is 82% achievable? or is 65% more realistic?
.

82, not chance but 65% can be a little on the low side. In to the 70's can be achievable but very much depends on your personal situation, your expenses, how much you put in to pension and in your case how much tax you've already paid this year.

You sure you shouldn't stay brolly?

[northernladuk]

Did any of the firms give you an illustration?

Even an illustration isn't going to help. He's paid tax via his brolly this year so whatever the illustration is for this year it will be completely different next year.

[ladymuck]

Even an illustration isn't going to help. He's paid tax via his brolly this year so whatever the illustration is for this year it will be completely different next year.

I hit post before I finished and didn't bother editing

I agree that a mid-year change would give a skewed view. However, I would want to see some detail behind the retention figures to understand what they are based on.

[northernladuk]

A thread with exactly the same question here but some useful points about company money and personal money which will be useful to the OP.

https://www.contractoruk.com/forums/...take-home.html

[Patrick@Intouch]

If you invoiced £60k per year through your company, incurred no costs in running the company and only took salary to the secondary threshold then you could retain around 79% of your company's invoiced turnover.

Turnover - £60,000
Salary - £ 8,632
Profit - £51,368
CT - £ 9,760
Divi's - £41,608

Your income then:

Salary - £ 8,632
Dividends - £41,608
Total - £50,240
Income tax - £2,740
After tax - £47,500 (79.17% of turnover)

Of course this doesn't allow for you to incur any costs in travelling to work, using a phone or engaging an accountant... so a retention rate somewhere in the 70's% would be reasonable.

[ECommerceConsultant]

You sure you shouldn't stay brolly?

The recruitment company for my new contract only accepts "FCSA certified umbrellas" and since my longstanding umbrella isn't registered with FCSA, they refuse to accept it. So now is a good time to make the jump into LTD company.
Thanks for letting me know it's normal to get a retention in the 70's.

[ECommerceConsultant]

If you invoiced £60k per year through your company, incurred no costs in running the company and only took salary to the secondary threshold then you could retain around 79% of your company's invoiced turnover.

Turnover - £60,000
Salary - £ 8,632
Profit - £51,368
CT - £ 9,760
Divi's - £41,608

Your income then:

Salary - £ 8,632
Dividends - £41,608
Total - £50,240
Income tax - £2,740
After tax - £47,500 (79.17% of turnover)

Of course this doesn't allow for you to incur any costs in travelling to work, using a phone or engaging an accountant... so a retention rate somewhere in the 70's% would be reasonable.

Thanks Patrick, the invoiced amount is around £96K per year, and it will be a one year assignment. I'm not sure if that makes a difference in the retention outcome. I'll message you for your contact details.