Ir35 calculator to know when its not worth it to work

[cwah]

Hello

i'm now forced into umbrella and I'm starting with putting as much as I can into my pension.

However, I know that at some stage it'll reach the maximum allowance and I'll need to know by when it's no good to work anymore.

I know I pay less income tax and national insurance below some threshold. And I'd like to know what would be my net income if for example I only receive:
- £12.5k (basic allowance)
- £20k
- £30k
- etc.

I'd like to know how does my net income gradually decrease to end up down 55%. From the moment I receive below 70% net income would be the time I'll think to take a break until the start of next fiscal year....


Edit: I've done the calculation below:
Here's the table of the various tax rate depending on the income threshold:

Income tax
Personal Allowance	Up to £12,570	0.00%
Basic rate	£12,571 to £50,270	20.00%
Higher rate	£50,271 to £150,000	40.00%
Additional rate	over £150,000	45.00%
Employee National insurance
Per month	Per year	Tax rate
120	1440	0.00%
797	9564	12.00%
4189	50268	2.00%
Employer National insurance
Per month	Per year	Tax rate
120	1440	0.00%
797	9564	13.80%
4189	50268	13.80%
Apprenticeship levy		0.50%

So in term of tax, that would mean:

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 basically I'd be paying 25% tax rate until I reach £12,571 income. Past that amount, I'd pay half of my income to the taxman + fees (42%).

So what that means, is that my total income before it's not worth it to work anymore is £40k (Max pension)+£12.57k (Personal allowance threshold) = £52.57k

£52.57k total invoiced income is the amount for which it's not worth it to work anymore under IR35.


Edit2:
Personal allowance (i.e. the £12570) is reduced by £1 for every £2 you earn over £100k.

Here's the explanation:

Income Tax rates and Personal Allowances : Income over £100,000 - GOV.UK (www.gov.uk)

In practice, this means that anything earned between £100k and £125k(ish) is MASSIVELY taxed.

[eek]

Quick answer

With a £40k pension allowance the figure will be hit when the invoice figure reaches £90,000. If you are using salary sacrifice and minimum income you will know as you approach that figure as you will hit the £40k limit well before you start receiving proper money.

If you are being really awkward and don't want any single payment to be below 70% of invoice income, that will depend on a whole number of factors but it will hit it as soon as you can no longer pay into a pension.

[lecyclist]

Assuming your pension has been open for 3 previous years and has unused allowances, you probably know already that you can also max out your contributions for those years also. So including this year's allowance, that would be 4x £40,000 as your maximum contributory amount.

[cwah]

My pension has always been filled to its max so I can't get more than £40k this year.

My plan is to have salary sacrifice and minimum wage up to £40k pension.

I've done the calculation, I'm going to update my original post.

[Lance]

When does it make sense for the industry to change and start using contractors as genuinely self-employed?
Like the building industry does. Surely that should be a target for HMRC.
What is stopping it happening now? I know someone mentioned about agencies/law stuff. But what in reality prevents it?

[eek]

When does it make sense for the industry to change and start using contractors as genuinely self-employed?
Like the building industry does. Surely that should be a target for HMRC.
What is stopping it happening now? I know someone mentioned about agencies/law stuff. But what in reality prevents it?

Agencies act 1977 stops agencies supplying self employed people and given that is how most contractors find work nothing is going to fix that.

oh and CIS isn’t an easy to follow scheme, I continually need to check things as I write some code regarding it as it’s not simple nor clearcut - as with everything it’s designed by HMRC to make sure they get their money - trust me you don’t want it implemented on yourself

[BR14]

Agencies act 1977 stops agencies supplying self employed people and given that is how most contractors find work nothing is going to fix that.

I remember that. had to set up my first Ltd then

[Glencky]

To the OP - your maths is wrong - based on your calculations it should be £52.57k rather than £62.57k

Could be a typo.

But the main thing I wanted to say is it's also more materially wrong. Given what you say you plan to do, it isn't going to affect what you do, but I'm mentioning it for the benefit of others.

Although you've taken into account the tranches of income on which you will pay a) basic; b) higher and c) additional rate tax, you haven't taken into account the fact that your personal allowance (i.e. the £12570) is reduced by £1 for every £2 you earn over £100k.

Here's the explanation:

Income Tax rates and Personal Allowances : Income over £100,000 - GOV.UK (www.gov.uk)

In practice, this means that anything earned between £100k and £125k(ish) is MASSIVELY taxed.

EDITED to add: this is taken into account in your tax return i.e. PAYE tax won't sort it out, it just comes as a nasty surprise later (if you're not expecting it).

[Lance]

Agencies act 1977 stops agencies supplying self employed people and given that is how most contractors find work nothing is going to fix that.

oh and CIS isn’t an easy to follow scheme, I continually need to check things as I write some code regarding it as it’s not simple nor clearcut - as with everything it’s designed by HMRC to make sure they get their money - trust me you don’t want it implemented on yourself

Thanks.

I'm not worried for myself as I have plenty of outside IR35 work myself right now, and a pipeline of opportunity for the medium term.
But it seems to me that IR 35 is there to prevent the tax benefits of disguised employment, when self-employed does that already. It taxes workers at broadly the same as an employee (with some discounts on NICs), and allows legitimate expenses to offset tax.
It seems to me that right there is the answer for HMRC. They'll still have a better tax take as self-employed are paid more money. And they won't need such complex rules that even they don't understand.

Then those that need to incorporate as they are actually running a business, as opposed to just being self-employed for all intents and purposes.


anyway... Just ranting... As none of this makes sense.
Shouldn't there be a department for dealing with this? Maybe they could call it "The Tax Simplification Office"

[cwah]

To the OP - your maths is wrong - based on your calculations it should be £52.57k rather than £62.57k

Could be a typo.

But the main thing I wanted to say is it's also more materially wrong. Given what you say you plan to do, it isn't going to affect what you do, but I'm mentioning it for the benefit of others.

Although you've taken into account the tranches of income on which you will pay a) basic; b) higher and c) additional rate tax, you haven't taken into account the fact that your personal allowance (i.e. the £12570) is reduced by £1 for every £2 you earn over £100k.

Here's the explanation:

Income Tax rates and Personal Allowances : Income over £100,000 - GOV.UK (www.gov.uk)

In practice, this means that anything earned between £100k and £125k(ish) is MASSIVELY taxed.

EDITED to add: this is taken into account in your tax return i.e. PAYE tax won't sort it out, it just comes as a nasty surprise later (if you're not expecting it).

Thanks good point I've updated my post.