Plan B turnover amount?

[scooby]

IMHO you are doing this all wrong. You should be developing a plan of what you think the Plan B can achieve and then seeing what is available for salary and dividend after that.

WJJS

[Scrag Meister]

Do you want us to include our consultancy charge or do you want to pay that in beer?

FTFY, or is there BIK associated with beer?

[Spoiler]

IMHO you are doing this all wrong. You should be developing a plan of what you think the Plan B can achieve and then seeing what is available for salary and dividend after that.

Appreciate it may not be the correct way of doing this, but we have a potential revenue stream and we need to see if this can pay what all individuals need to live on (short term) or whether 2 jump ship and kick off the business, with the other 2 following on 6 months later or so.

[Spoiler]

24k x 4 = 96k. Gross up for CT = 120k. So this needs to be your profit target in order to be able pay divs of 2k net per month.

The thing missing is that £24k is the take home figure, so the business needs to make more in order to pay a gross wage.

Think I may just use paying a PAYE salary which will then give me some headroom - there will be some money left over as it will be done more efficiently (low wage + divis).

Gross salary for a £2k take home: £32,000
Salary x 4: £128,000
Employers NI: £13,550
Corp tax: ???

[MarillionFan]

Now then - plan B is in the inception stage. However, I need to work out a target for year 1 turnover and am hoping some clever people here can assist!

Plan B will consist of 4 people (all directors & employees) - if all 4 will be taking home £2,000 a month in salary equivalent, any idea what the basic turnover of the company would need to be?

I guess if we were just employees, then we'd be looking at an annual salary of around £33k to get a £2k take home, but as directors we should be able to be more tax efficient, which would mean less turnover needed? Also need to include the employers contributions for tax\NI.

I'm working on a list of other costs which will bump up turnover requirements (accountant fees, expenses, etc) but it was the salary + dividend stuff I'm struggling with.

As you don't state, I'll put all 4 of you as PAYE. Best to do this as well so you can calculate a higher figure

So approx £32000 salary per year. Plus £3400 NI Contributions. So call is £36000 per member of staff.

So salary costs = £36000 x 4 = £152000 per annum

Assume no more than 230 billing days per year(I would start at 200) though. So £152k/800 working days = £190 per day.

That's your salary breakeven. So Corp tax doesn't figure in at this point.

Then add you other costs.

Plus go and buy Microsoft Excel you tight git.

[JamJarST]

Appreciate it may not be the correct way of doing this, but we have a potential revenue stream and we need to see if this can pay what all individuals need to live on (short term) or whether 2 jump ship and kick off the business, with the other 2 following on 6 months later or so.

Still think you should develop a proper plan and see what the bottomline figures are and then see how much that could pay the 4 of you and not the other way round. Its a bit like project planning, setting the end date and trying to fit all the tasks in before that is often the wrong way to do it, you plann all the steps with the resources you have and then see what end dat that lets you achieve.

[Clare@InTouch]

The thing missing is that £24k is the take home figure, so the business needs to make more in order to pay a gross wage.

Think I may just use paying a PAYE salary which will then give me some headroom - there will be some money left over as it will be done more efficiently (low wage + divis).

Gross salary for a £2k take home: £32,000
Salary x 4: £128,000
Employers NI: ???
Corp tax: ???

CT is after expenses, including salary. So on the basis of the figures in my earlier post:

If you're looking at salary only, then you need a gross salary of £31,566 to get £24,000 after tax, assuming a normal tax code. That results in NI of £3,323. So £34,889 altogether.

That's £34,889 x 4 = £139,556.

Say you have a turnover of £150,000, then wages of £139,556, that's a profit of £10,444 on which you pay 20% CT of £2,089 to leave £8,355 retained profit. The retained profit is then the amount available for dividend.

[MarillionFan]

Still think you should develop a proper plan and see what the bottomline figures are and then see how much that could pay the 4 of you and not the other way round. Its a bit like project planning, setting the end date and trying to fit all the tasks in before that is often the wrong way to do it, you plann all the steps with the resources you have and then see what end dat that lets you achieve.

Both ways are valid. I always calculate what I need to turnover to hit breakeven. That way I can see if it's a goer or not, when I put my projected sales in.

[Spoiler]

So salary costs = £36000 x 4 = £152000 per annum

Thanks, just made the same conclusion having calculated employers NI. So, at this point as there is no profit, there's no CT.

Think I complicated this by attempting to use low salary + divis, rather than full PAYE (although we won't do full PAYE in reality).

Off now to add in other expenses (in excel!).

Ta.

[Spoiler]

Say you have a turnover of £150,000, then wages of £139,556, that's a profit of £10,444 on which you pay 20% CT of £2,089 to leave £8,355 retained profit. The retained profit is then the amount available for dividend.

Thanks.