Roughly what money do you get back when renting accomodation?

[moomoo]

Im contracting and working away from home during the week. I have an ltd (managed by umbrella).

If I rent a flat or something then most of that money will come out of my own pocket won't it? Thats what Ive always thought so to maximise my income Ive always ended up living in sh*t holes!

I must be missing something because a fellow contractor is happily spending nearly £100/day on a studio style hotel room - I cringe having to spend £35 /day. He says it comes out of his tax bill, like it costs him nothing, but thats not correct is it?

[Kanye]

I must be missing something because a fellow contractor is happily spending nearly £100/day on a studio style hotel room - I cringe having to spend £35 /day. He says it comes out of his tax bill, like it costs him nothing, but thats not correct is it?

No, that's not correct.

You don't pay your expenses out of your tax bill.

You pay taxes on your income - expenses.

Which means he's not paying tax on 20% to 40% of the £100.

Or looked at another way, he's getting a 20% to 40% discount on the accomodation.

[stek]

No, that's not correct.

You don't pay your expenses out of your tax bill.

You pay taxes on your income - expenses.

Which means he's not paying tax on 20% to 40% of the £100.

Or looked at another way, he's getting a 20% to 40% discount on the accomodation.

Perfect explanation.

In my accountancy days I did a bit on the side for self-employeds, the number who spent their tax liability on a car thinking it wiped it out and was a effectively a 'free' car...

[Wanderer]

I must be missing something because a fellow contractor is happily spending nearly £100/day on a studio style hotel room - I cringe having to spend £35 /day. He says it comes out of his tax bill, like it costs him nothing, but thats not correct is it?

If he wants to spend the money then good for him, but your friend is living in a fools paradise if he thinks he's getting it for "free". If it did come straight out of the tax then we would all be living it large on the tax man, wouldn't we!

Figure out how much tax you pay overall and that is the discount you get on anything you put through on expenses.

[jmo21]

Im contracting and working away from home during the week. I have an ltd (managed by umbrella).

If I rent a flat or something then most of that money will come out of my own pocket won't it? Thats what Ive always thought so to maximise my income Ive always ended up living in sh*t holes!

I must be missing something because a fellow contractor is happily spending nearly £100/day on a studio style hotel room - I cringe having to spend £35 /day. He says it comes out of his tax bill, like it costs him nothing, but thats not correct is it?

Technically, no it does not come out of YOUR pocket.

It comes out of your companies "pocket".

This in turn reduces the amount of money that you can extract from your company into your pocket.

You can save some money by having the company pay for it as an expense, the 20% - 40% "discount"/tax saving mentioned above.

Either your mate doesn't understand that, or you picked him up wrong.

[SueEllen]

Im contracting and working away from home during the week. I have an ltd (managed by umbrella).

If I rent a flat or something then most of that money will come out of my own pocket won't it? Thats what Ive always thought so to maximise my income Ive always ended up living in sh*t holes!

I must be missing something because a fellow contractor is happily spending nearly £100/day on a studio style hotel room - I cringe having to spend £35 /day. He says it comes out of his tax bill, like it costs him nothing, but thats not correct is it?

Nope.

It comes out of his income before he is taxed.

Or it's subtracted from his gross income then he's taxed on what is left.

To avoid living in sh*tholes I suggest you work out what rate you would like then add the accommodation expense on it for reasonable accommodation. Life is too short to stay in sh*tholes for long...........

Even if you are in London you should be able to find somewhere decent where you can be someone's Monday-Friday lodger for a reasonable amount.

[SueEllen]

Either your mate doesn't understand that, or you picked him up wrong.

moomoo is using an umbrella company so is under PAYE.

I have no idea how a Ltd is put under an umbrella company as MSC's have been tax inefficient (not worth doing) for years.

[xoggoth]

I cringe having to spend £35 /day

A man after my own heart. Who cares where you live as long as you are saving money? As others have said, a flat is a valid expense deductable from co profits as alternative to hotel assuming you also have a main home. They might query excessive luxury.

[SueEllen]

A man after my own heart. Who cares where you live as long as you are saving money? As others have said, a flat is a valid expense deductable from co profits as alternative to hotel assuming you also have a main home. They might query excessive luxury.

Having seen the damp cold vermin infested tulipholes that some of my fellow students lived in while at university I do have some standards.

But then again lots of modern students demand higher accommodation standards then I do.

[stek]

Having seen the damp cold vermin infested tulipholes that some of my fellow students lived in while at university I do have some standards.

But then again lots of modern students demand higher accommodation standards then I do.

One fellow contractor lived in caravan in field full of horses with a gas heater and a tiny black and white portable telly.

He was from Blackburn though, the caravan was living the high life to him prolly....

For me, living like that would negate the point of contracting, ie a better work/life experience..