IR35 defeat costs IT contractor £99,000

[Ruprect]

You have found my schoolboy mathmatical error

Try

£5000 - No Tax / NI
£28,000 - 22% Tax / 11% NI / 13% Emp NI = 46% - £12,880
£67,000 - 40% tax / 1% NI / 13% Emp NI = 54% - £36,180

Take home £50,940
Tax/NI £49,060

That looks more realistic

jeeeeeeeeeeeeeeeeeeeezzzzus

50% tax!!! I'm voting tory from now on.

[VectraMan]

49% tax. It's only fair.

[Ardesco]

jeeeeeeeeeeeeeeeeeeeezzzzus

50% tax!!! I'm voting tory from now on.

More than that!!!

Bear in mind that almost everything you buy has VAT of 17.5% on it, and then don't forget duty on fuel and alcohol (and fags if you're a smoker).

So out of your £50,000 at least another £10,000 is going on tax.

[beaker]

You have found my schoolboy mathmatical error (There's a reason i let the accountant work this out)

Try

£5000 - No Tax / NI
£28,000 - 22% Tax / 11% NI / 13% Emp NI = 46% - £12,880
£67,000 - 40% tax / 1% NI / 13% Emp NI = 54% - £36,180

Take home £50,940
Tax/NI £49,060

That looks more realistic

How depressing... according to IR35calc you would need a permie salary of £76K to get the same take-home. This employer's NI thing really is bollocks...

[VectraMan]

So the non-IR35 case assuming £5K salary:

CT: £19K
Divs: 28,000 tax free
Extra divs: 48000 @ 22.5% = £10800

Tax = £29800
Take home = 70200

Does that sound believable?

[Ardesco]

How depressing... according to http://calculator.contractoruk.com/ you would need a permie salary of £76K to get the same take-home. This employer's NI thing really is bollocks...

And that same permie is only paying £26,870 in tax to HMRC. Admittedly the permies company picks up the Emp NI bill of £9,230.

Just goes to show how unfair IR35 is to us though.

[Ardesco]

So the non-IR35 case assuming £5K salary:

CT: £19K
Divs: 28,000 tax free
Extra divs: 48000 @ 22.5% = £10800

Tax = £29800
Take home = 70200

Does that sound believable?

I thought extra divs were at 25% now (See my last post on previous page)

[beaker]

And that same permie is only paying £26,870 in tax to HMRC. Admittedly the permies company picks up the Emp NI bill of £9,230.

Just goes to show how unfair IR35 is to us though.

Absolutely... The worst bit is every additional £1 you make, HMRC takes 0.54p in tax. It's no wonder nobody can be arsed in this country. Where's the incentive?

Why should I pay Emp NI if I am only employing myself?

Anyway I'm on the bench, so my tax bracket ain't moving up in a hurry

[Hiram King Of Tyre]

You have found my schoolboy mathmatical error (There's a reason i let the accountant work this out)

Try

£5000 - No Tax / NI
£28,000 - 22% Tax / 11% NI / 13% Emp NI = 46% - £12,880
£67,000 - 40% tax / 1% NI / 13% Emp NI = 54% - £36,180

Take home £50,940
Tax/NI £49,060

That looks more realistic

Does EEs NI go down to 1% at the 40% threshold? 46%-%54% isn't a massive difference

[tim123]

Roughly

£5000 - No Tax / NI
£28,000 - 22% Tax / 11% NI / 13% Emp NI = 46% - £12,880
£35,142 - 40% tax / 1% NI / 13% Emp NI = 54% - £18,977

.

Jeez are you still ALL making this basic mistake. The effect of ERNI is not additive.

The total of 13% ERNI, 20% tax and 11% EENI is 40.7%
and 13% ERNI, 40% tax and 1% EENI is 47.7%.

tim