Take home within IR35

[scottj82]

Evening all,

in the next week or so I may be taking my first contract, the rate is not the best I have been put forward at but I am still tempted just to get me into the contracting market. the rate will be £21 per hour with a reasonable amount of overtime. the problem I seem to have is this contract certainly falls within IR35. The take home calulators I have used on contracting websites have come back with a perm salary comparison of £25,500. why? even with 4 weeks unpaid holiday I will earn 37k I dont understand why my tax % will be so much higer as a contractor. IR35 is meant to distinguish a contractor from a perm employee, as a "disguised employee" why dont I pay the same tax % as a salaried employee? if someone could clairfy this for me I would appreciate it.

Regards

Justin Scott

[malvolio]

Evening all,

in the next week or so I may be taking my first contract, the rate is not the best I have been put forward at but I am still tempted just to get me into the contracting market. the rate will be £21 per hour with a reasonable amount of overtime. the problem I seem to have is this contract certainly falls within IR35. The take home calulators I have used on contracting websites have come back with a perm salary comparison of £25,500. why? even with 4 weeks unpaid holiday I will earn 37k I dont understand why my tax % will be so much higer as a contractor. IR35 is meant to distinguish a contractor from a perm employee, as a "disguised employee" why dont I pay the same tax % as a salaried employee? if someone could clairfy this for me I would appreciate it.

Regards

Justin Scott

Do the reading, don't just guess. There's a reasonable guide on the right, you could Googling for "The Potted Guide to IR35" ( ), you really must visit the PCG website and download their guide to freelancing. then you may understand a bit more of the long list of things you don't know that you don't know. But no problem, we all have to start somewhere.

Firstly, you probably aren't inside IR35. 99% of all challenged cases have been found not to be.

But assuming you are - or have decided you are so are acting accordingly - take your gross income less certain business expenses. Take 5% off that and what is left is what you pay tax on at full PAYE/NICs including employer's NICs.

Which, as you have discovered, means your hourly rate multiplied by 1000 gives you the equivalent permanent annual salary. Which means that you don't go contracting to make shed loads of money any more, unless you are serious specialist or working for an IB with more money than sense.

HTH...

[mudskipper]

Evening all,

in the next week or so I may be taking my first contract, the rate is not the best I have been put forward at but I am still tempted just to get me into the contracting market. the rate will be £21 per hour with a reasonable amount of overtime. the problem I seem to have is this contract certainly falls within IR35. The take home calulators I have used on contracting websites have come back with a perm salary comparison of £25,500. why? even with 4 weeks unpaid holiday I will earn 37k I dont understand why my tax % will be so much higer as a contractor. IR35 is meant to distinguish a contractor from a perm employee, as a "disguised employee" why dont I pay the same tax % as a salaried employee? if someone could clairfy this for me I would appreciate it.

Regards

Justin Scott

What you possibly haven't taken into account is that you pay employers NI as well as employees - an additional 13.8%