Ir35 calculator to know when its not worth it to work

[Lance]

- 42% is the basic tax rate, so the tax you pay when you earn between £12,571 and £50,270

that cannot be true for every amount between those figures. NICs start at a lower number than IT therefore the amount of tax paid will be different at every point.

Ignoring the apprenticeship levy and employer NICs.......
Earn £20,000 in 2021/2022 and you'll take home £17,264. That's 14% tax.
Earn £50,000 in 2021/2022 and you'll take home £37,664. That's 25% tax.

This is why a simple table cannot work.

[cwah]

that cannot be true for every amount between those figures. NICs start at a lower number than IT therefore the amount of tax paid will be different at every point.

Ignoring the apprenticeship levy and employer NICs.......
Earn £20,000 in 2021/2022 and you'll take home £17,264. That's 14% tax.
Earn £50,000 in 2021/2022 and you'll take home £37,664. That's 25% tax.

This is why a simple table cannot work.

That's why I put 2 table.

This one is for the total tax rate:

Total gross income	Tax band	Tax amount	Total tax rate	Comment
£9,564	£9,564	£48	0.50%	Apprenticeship levy
£12,571	£3,007	£739	6.26%	National insurance + Apprenticeship levy
£50,270	£37,699	£15,730	32.86%	Basic rate income tax + national insurance + apprenticeship levy
£100,000	£49,730	£25,011	41.53%	Higher rate income tax + national insurance + apprenticeship levy
£125,140	£37,711	£18,179	47.71%	Higher rate income tax + national insurance + apprenticeship levy + removal of personal allowance
£149,999	£24,859	£12,503	48.14%	Additional rate income tax + national insurance + apprenticeship levy
£200,000	£50,001	£27,290	49.75%	Additional rate income tax + national insurance + apprenticeship levy

It reflect the tax you pay at the exact amount indicate. Which is what you tried to gave me as example.


And this one is the amount of tax you pay within the respective tax band:

Total income	Tax rate	Note
£9,564	0.50%	Apprenticeship levy
£9,564 to £12,571	25%	National insurance + apprenticeship levy
£12,571 to £50,270	42%	Basic rate income tax + national insurance + apprenticeship levy
£50,271 to £150,000	50%	Higher rate income tax + national insurance + apprenticeship levy
At £150,000	55%	Additional rate income tax + national insurance + apprenticeship levy

So, taking your example, if you want to know your total tax rate, you look at the first table, and know that your £20k will be between 6.26% to 32.86%.

And if you want to know how much tax you pay on different earning bracket, you use the 2nd table. So you know from £12,571 any additional money earned is taxed at 42%.

But yeah, the total tax is only accurate if you earn exactly the amount within the bracket, but I think it's enough to get an estimate of tax paid and make decision from there

[eek]

That's why I put 2 table.

This one is for the total tax rate:

Total gross income	Tax band	Tax amount	Total tax rate	Comment
£9,564	£9,564	£48	0.50%	Apprenticeship levy
£12,571	£3,007	£739	6.26%	National insurance + Apprenticeship levy
£50,270	£37,699	£15,730	32.86%	Basic rate income tax + national insurance + apprenticeship levy
£100,000	£49,730	£25,011	41.53%	Higher rate income tax + national insurance + apprenticeship levy
£125,140	£37,711	£18,179	47.71%	Higher rate income tax + national insurance + apprenticeship levy + removal of personal allowance
£149,999	£24,859	£12,503	48.14%	Additional rate income tax + national insurance + apprenticeship levy
£200,000	£50,001	£27,290	49.75%	Additional rate income tax + national insurance + apprenticeship levy

It reflect the tax you pay at the exact amount indicate. Which is what you tried to gave me as example.


And this one is the amount of tax you pay within the respective tax band:

Total income	Tax rate	Note
£9,564	0.50%	Apprenticeship levy
£9,564 to £12,571	25%	National insurance + apprenticeship levy
£12,571 to £50,270	42%	Basic rate income tax + national insurance + apprenticeship levy
£50,271 to £150,000	50%	Higher rate income tax + national insurance + apprenticeship levy
At £150,000	55%	Additional rate income tax + national insurance + apprenticeship levy

So, taking your example, if you want to know your total tax rate, you look at the first table, and know that your £20k will be between 6.26% to 32.86%.

And if you want to know how much tax you pay on different earning bracket, you use the 2nd table. So you know from £12,571 any additional money earned is taxed at 42%.

But yeah, the total tax is only accurate if you earn exactly the amount within the bracket, but I think it's enough to get an estimate of tax paid and make decision from there

Except it's wrong for reasons I've already posted.

[NowPermOutsideUK]

I won’t go into the numbers because I have not looked at them carefully but the OP makes a valid point that at some point working is no longer beneficial if more than half goes to the tax man

I don’t want to troll but speaking to someone who had just under 60 k of personal rental income he turned down a perm job of 135k and accepts he cannot ever work in the Uk again as a perm.

when ir35 was not strict and dividends less taxed then it was a different story

[Lance]

I won’t go into the numbers because I have not looked at them carefully but the OP makes a valid point that at some point working is no longer beneficial if more than half goes to the tax man

I don’t want to troll but speaking to someone who had just under 60 k of personal rental income he turned down a perm job of 135k and accepts he cannot ever work in the Uk again as a perm.

when ir35 was not strict and dividends less taxed then it was a different story

when paying your share to society as a whole makes working unacceptable then we (society) have a problem.

[hobnob]

I won’t go into the numbers because I have not looked at them carefully but the OP makes a valid point that at some point working is no longer beneficial if more than half goes to the tax man

I don't think the percentage is that important. The question is, how much money would you get from that extra work, and is that worth the effort?

For instance, I could get a second job at evenings/weekends doing pizza deliveries, which would probably be roughly minimum wage. I'd get the majority of that money, i.e. tax would be less than half, but it's not worth it for me; I'd rather have that time off.

At the other extreme, suppose that someone offered me a contract at 1 million pounds a week, but I knew that 70% would go in tax, NI, etc. So, I'd "only" get £300,000 per week as take home pay. I'd jump at the chance, i.e. that would definitely be worth it for me, even though the tax man got more than half. (The same would be true if I was paying 90% tax on that income.)

Most people will be somewhere in the middle. So, it's worth doing calculations to figure out how much money you'll actually get from a particular role, but ultimately it will depend on your personal circumstances, e.g. if you're saving up to buy a new house.

[cwah]

There are so many reasons why it's good to know how much is the total tax is. On the top of my mind:
- Plan for holidays. Instead of being taxed at 50% (or more), why not only work in between 2 fiscal years? So a £100k total income can be divided into 2 years at £50k if working through the right period.
- Being able to compare contract inside IR35 Vs Outside IR35 Vs Perm Vs Abroad. And switch to the most advantageous one.

[NotAllThere]

I don’t want to troll but speaking to as someone who had just under 60 k of personal rental income he turned down a perm job of 135k and accepts he cannot ever work in the Uk again as a perm.

FTFY. But it was twaddle when you first posted it, and it's twaddle now. You might as well say that as someone who has £135 perm job, I sold my property portfolio as it's just not worth having. Or someone who has a £135K job not accepting a £195K job.

If you want to pay less tax, the easiest way is to have a lower income. If you want to have more take home, just earn more.

[cwah]

when paying your share to society as a whole makes working unacceptable then we (society) have a problem.

I'm not against paying taxes. It's just not worth it at some stage. The few examples above illustrate it properly.

Not all contractors are having huge day rate to compensate. Would a £200/day inside IR35 worth it if you also get taxed half of it on top of not having any security? I'd say no.

[hugebrain]

If you want to pay less tax, the easiest way is to have a lower income. If you want to have more take home, just earn more.

No man is an island. That works for an individual, but not for society as a whole.

Consider that relative wealth is more important than actual wealth (both emotionally and practically when competing for scarce resources).

There are two parts of society: decent, hard-working people (like contractors) and worthless scroungers (state school teachers, doctors, diversity coordinators etc.).

Now, once they earn more than £12, 571, the decent people (as a whole) are making themselves worse off. This is because after taxes (add petrol tax, booze tax, VAT, stamp duty etc.) and government borrowing, the scroungers are getting more of the decent people’s wages than they get themselves. The harder the decent people (as a whole) work, the richer the scroungers get.

That’s why the scroungers set up the system this way. The > 50% tax rate is not set based on some need for necessary government services. It is set that way so that relative poverty is inescapable. No matter how hard you work, you cannot possibly escape the faster-growing wealth of the scrounging class.