Ir35 calculator to know when its not worth it to work

[NotAllThere]

Your calculation is completely out of touch.

I was simplifying the example for the hard of thinking. Sorry if that level of sophistication is beyond you.

Anyway - you go ahead and whine and commiserate with your buddies about how every £1 you earn extra you only get 5p. Those of us who've reconciled ourselves that change is unlikely, that short of becoming Chancellor, there's nothing we can do about it, will simply continue to generate more income for ourselves.

I think there's nothing to add to this thread. Life's unfair. All systems of taxation are unfair. As are all systems of government. Thread locked.

[cwah]

Thank you for an unrealistic, contrived and pathalogical example. Back in the real world, the redistribution goes to Bobs 1-100. They each get 30p more (the other £30 pays for roads, civil servant salaries etc.). They have £100.30 and you have £140. You're better off. And none of you can afford the wine.

There are some rare cases in real life where it works out that you are in fact worse off if you earn a bit more. But they're rare and tend to be caused by boundary conditions. Once you're away from there, more income == more income. Even with redistribution.

I wouldn't be on £200 a day. I'd be on £800. £600 for one contract £200 for the other. And I'm still better off than you by £110. The whole "it's so unfair" relies on contrived examples and only looking at the marginal rate. We live in a progressive taxation regime - this is what you get. What the government could do which would stop the hard-of-thinking whining, is publish tax rates as a percentage of total income.

If on a daily rate, £100 were tax free, the next £500 at 25% and everything above that 50%, you end up with:

Daily Rate	%	Take home
100	0%	100
200	13%	175
300	17%	250
400	19%	325
500	20%	400
600	21%	475
700	25%	525
800	28%	575
900	31%	625
1000	33%	675
1100	34%	725
1200	35%	775

Oh no, I'm earning 800, he's earning 600. I pay 7% more tax than him. How terribly unfair...

Your calculation is completely out of touch and if you look at the tax table for an inside IR35 tax rate, you should know that any income above £12,570 is taxed to 45% (lower income bracket) - 55% (Higher-income bracket).

So really your £800/day end up in your pocket to £350-400/day but as I said before, on high income it's not such a problem to end up with half of it.

I'm sure you'll still feel your work is valued with a take-home of almost £50/h. The story would be different on £200/day because then your take home would be about £13/h, and you'd probably earn more being a deliveroo driver or something of that sort.

[NotAllThere]

A shorter, but probably more succinct version of my response.

[pr1]

VAT at 20% is what you pay from your post-tax income so the effective rate is higher

[Lance]

Um, not sure why you’re smiling about, or what mathematical method you use. VAT is more than that and your tax rate is actually more than 65%.

[NotAllThere]

imagine there are just two people, you and Bob and one bottle of wine. You earn £100 and Bob gets £100. The wine costs £100 a bottle. Everything is equal.

Now you decide to work harder. So you get an extra £100 wages, of which £60 goes to Bob, you get to keep £40. The price of wine goes up to £150 a bottle.

You think you are better off because you now earn £140, but in fact you are worse off. You can no longer afford the wine, but Bob can.

Thank you for an unrealistic, contrived and pathalogical example. Back in the real world, the redistribution goes to Bobs 1-100. They each get 30p more (the other £30 pays for roads, civil servant salaries etc.). They have £100.30 and you have £140. You're better off. And none of you can afford the wine.

There are some rare cases in real life where it works out that you are in fact worse off if you earn a bit more. But they're rare and tend to be caused by boundary conditions. Once you're away from there, more income == more income. Even with redistribution.

Why do you compare against CEO wage at £500k? Of course if I earn such amount I wouldn't mind paying 50-60% tax rate.


Would you work at 45% tax rate if you were on £200/day?

I wouldn't be on £200 a day. I'd be on £800. £600 for one contract £200 for the other. And I'm still better off than you by £110. The whole "it's so unfair" relies on contrived examples and only looking at the marginal rate. We live in a progressive taxation regime - this is what you get. What the government could do which would stop the hard-of-thinking whining, is publish tax rates as a percentage of total income.

If on a daily rate, £100 were tax free, the next £500 at 25% and everything above that 50%, you end up with:

Daily Rate	%	Take home
100	0%	100
200	13%	175
300	17%	250
400	19%	325
500	20%	400
600	21%	475
700	25%	525
800	28%	575
900	31%	625
1000	33%	675
1100	34%	725
1200	35%	775

Oh no, I'm earning 800, he's earning 600. I pay 7% more tax than him. How terribly unfair...

[hugebrain]

Wait till you hear about VAT..... 20% on everything you buy.
Using your mathematical method that means your tax rate is actually 65%

Um, not sure why you’re smiling about, or what mathematical method you use. VAT is more than that and your tax rate is actually more than 65%.

[Lance]

If you looked at my table, you'll realise that the chart you are showing is incomplete because it doesn't include the employer national insurance that's at an whooping 13.8% + apprenticeship levy.

So on £48k a year, the total averaged tax is 32.5%. But really, all it's doing is to average up the initial personal allowance (taxed at 6% until £12,571) then any additional income is taxed at 42% (+ umbrella fees).

You can always average up to make you feel your total tax rate is lower, but the reality is that any income past £12,571 will be cut by almost half.

as stated earlier I can't be bothered to work out eNICS and apprenticeship levy.

All I can say is welcome to the real world. Whether you work for an umbrella or a proper employee those costs are part of the cost of employing you. You might not see it but it's there all the same.

Wait till you hear about VAT..... 20% on everything you buy.
Using your mathematical method that means your tax rate is actually 65%

[cwah]

I don't understand why you're not getting this.
If you earn £200 a day and assume 240 days chargeable. That's £48k a year. That's taxable at 25%.
The marginal tax rate is higher than that, and that varies even more than your (very) loose calculations.
Your marginal tax rate will only exceed 45% if you have children and earn between £50k and £60k, or if you earn £100k to £120k, or over £150k.

As for not caring when you earn over £1k a day.... you're making no sense.

If you looked at my table, you'll realise that the chart you are showing is incomplete because it doesn't include the employer national insurance that's at an whooping 13.8% + apprenticeship levy.

So on £48k a year, the total averaged tax is 32.5%. But really, all it's doing is to average up the initial personal allowance (taxed at 6% until £12,571) then any additional income is taxed at 42% (+ umbrella fees).

You can always average up to make you feel your total tax rate is lower, but the reality is that any income past £12,571 will be cut by almost half.

[Lance]

Why do you compare against CEO wage at £500k? Of course if I earn such amount I wouldn't mind paying 50-60% tax rate.


Would you work at 45% tax rate if you were on £200/day? You would end up with half of it. That's what you'd get working for deliveroo or any low pay job actually.

Time is money. As simple as that. There is a point where it's not worth it unless the wage is very high.

And yes of course I wouldn't mind paying 50-60% tax if I could charge £1k/day. But that's not what this is about here

I don't understand why you're not getting this.
If you earn £200 a day and assume 240 days chargeable. That's £48k a year. That's taxable at 25%.
The marginal tax rate is higher than that, and that varies even more than your (very) loose calculations.
Your marginal tax rate will only exceed 45% if you have children and earn between £50k and £60k, or if you earn £100k to £120k, or over £150k.

As for not caring when you earn over £1k a day.... you're making no sense.