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The continuing nonsense of "Take Home Pay"

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    The continuing nonsense of "Take Home Pay"

    I saw something yet again on LinkedIn today about "Take Homes" and how if you "go Limited you can retain up to 85% of your earnings". We all know it's cobblers, especially these days, but the disparity between companies in the same group and then comparing that to an FCSA accredited company's calculator is fairly eye opening.

    I went to the four biggest contractor accountants and asked them to show me what my take home would be on £400 a day. On those that gave me a choice to add some variables I just stuck with the default, as most new contractors starting out will probably do the same. (Yes I did have nothing better to do during my lunch hour, thanks for asking)

    SJD, Nixon Williams and ClearSky are all part of the Optionis behemoth now and have been for a while but clearly those synergies have yet to kick in.

    SJD - £6,619.08 (79%) Take Home a month- assumptions are working 52 weeks a year but do at least default to Limited Cost Trader for the Flat Rate Scheme, assumes 5% of turnover spent on expenses.
    NW - £5,758.46 (75%) Take Home a month - this defaults to 46 working weeks a year which is much more realistic but clearly affects the amount , also assumes Limited Cost Trader
    ClearSky - £6,571.44 (no percentage given) Take Home a month - assumptions based on working 52 weeks a year, spending £317 a week on expenses, 16/17 tax rates (!) and just says the Flat Rate Scheme is included- it doesn't volunteer a percentage.

    So there's a difference of £860 a month there in the same group and Clearsky's is nearly two years out of date now - as you would expect the lower of those figures is the most realistic and the NW calculator is easily the best and most transparent.

    However, let's go and look at Brookson - FCSA accredited so we should get something approaching an accurate figure...

    Brookson £7,524.24 (no percentage given) Take Home a month - assumptions are working 40 hours a week for 52 weeks, spending £336 a week on expenses, no idea what tax rates but it says based on a 1001L tax code(?) and a flat rate VAT scheme of 13.5%.

    So if you put £400 a day into (FCSA Accredited) Brookson's calculator it will happily tell you that you will earn £1,765.78 a month more than the one at Nixon Williams

    All you have to do is never ever stop working, spend £336 a week on expenses (because money you spend and then claim back is somehow income), make sure you operate in an industry that will allow you a 13.5% Flat Rate, make sure you spend enough on the right expenses so you're not a limited cost trader and Bob's your uncle.

    Still at least the Brookson calculator doesn't say it's meant to be accurate.

    Using a contractor pay calculator gives you a fair estimate of how much you can expect to take home, allowing you to put aside money for tax. It’s best to be prepared in regards to your finances to avoid any surprises that you didn’t expect later in the year. This is where a contractor calculator can come in useful, giving you ample time and financial knowledge for the year ahead, join the thousands of contractors like yourself that have benefitted from the take home pay calculator.
    Oh.

    #2
    They are so inaccurate and highly dependant on individual circumstances I don't think I would have been bothered enough to write a long email about it. We've said forever the calcs are next to useless.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Originally posted by northernladuk View Post
      They are so inaccurate and highly dependant on individual circumstances I don't think I would have been bothered enough to write a long email about it. We've said forever the calcs are next to useless.
      It was more the fact that the worst one is the FCSA accredited one that caught my attention. Audited by EY and all that.

      Comment


        #4
        Originally posted by VelcroPower View Post
        It was more the fact that the worst one is the FCSA accredited one that caught my attention. Audited by EY and all that.
        What difference does it make? I must admit I don't understand why people get hung up on the calculators. I guess the new peeps are eager to see how many millions they are going to make. At then end of the day the reality is always very different. A couple of months on the bench or a long commute makes the numbers worthless.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Originally posted by VelcroPower View Post
          spend £336 a week on expenses (because money you spend and then claim back is somehow income)
          Oh.
          Apart from the obvious (accountant and insurance, etc), it is income.

          Comment


            #6
            Let's start with days worked: it won't be 52 weeks or anything linke it, even if you get a long running gig.

            Doesn't help that he's asked the wrong companies as well.

            And the calculators are to persuade you to use their services, not answer the question.

            You're a contractor running your own business. You take home what you want to take home after corporate and personal taxes are paid. What you do about expenses, pensions, warchest savings and everything else is up to you. You're also subject to your personal tax allowance, marital status, company share structure and several other minor things. Therefore you can't expect a simple answer along the lines of £400 a day will put £286.54p in your bank account every day.

            And if you're being as tax efficient as possible, you will be earning around £40k a year net and saving the rest anyway.
            Blog? What blog...?

            Comment


              #7
              Originally posted by l35kee View Post
              Apart from the obvious (accountant and insurance, etc), it is income.
              It really isn't.

              Comment


                #8
                Originally posted by malvolio View Post
                And if you're being as tax efficient as possible, you will be earning around £40k a year net and saving the rest anyway.
                and you'll be more skint than you've ever been in your life for at least 3 to 6 months while you squirrel every penny in to a warchest in case you get walked off site at a moments notice.
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Originally posted by l35kee View Post
                  Apart from the obvious (accountant and insurance, etc), it is income.
                  Yeah, because if I have to go see a client for a day in Chicago or Frankfurt in January, or go into the City for a day, those expenses are all income. Or buy a new laptop.

                  Comment


                    #10
                    Originally posted by VelcroPower View Post
                    It really isn't.
                    It really is.

                    Comment

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