Looking For Contract Rate to Permanent Salary Conversion Table

[pionium]

Annual sales (AS) = rate * 232 * 1.02225 (1.02225 is Flat-Rate VAT factor, based on 13% of gross vs. 17.5% net)
Expenses = travel + computers etc. + accountancy + pension + salary

From April you get 100% write-down on expenses, so no faffing about there

Assume accountancy etc. = £1k
Travel, IT equipment and others = £3k (assume that this is all money you would otherwise spend, so hence gravy)
Salary = £5,435

CT rate = 22%, in the long term,
Then corporate taxation (CT) =
((rate * 237.162) - 9,435) * 0.22

Annual sales = 237.162 * rate
CT = (237.162 * rate * .22) - (9435 * .22) = 52.17564R - 2075.70
So annual income =
total take = Annual Sales - accountancy fees (the only money you wouldn't otherwise spend) - Corporate Taxation - personal taxation
= 184.9864R + 1075.70 - PT

If you earn over the basic rate allowance, approx £42k, then you pay 25% tax on the net dividend. The basic rate allowance is approx £35,900. Which is £32,310 net (as a dividend).

Excess profits are then:
184.9864R + 1075.70 - 8435 - 32310
= 184.9864R - 39669.3

Personal tax is then that * 0.25

So
PT = 46.2466R -9917.325

If your company does not earn enough, you will not pay any higher-rate tax, but I disregard this case (this occurs when R < £215)

And hence take-home is
184.9864R - 46.2466R + 1075.70 + 9917.325
= 138.7398R + £10,993.03

As an employee, assuming BRA is £35,900 then with income tax rates of 31% and 41%, then you pay £11,129 of tax on the first £35,900, and then 0.41 * (salary - 41335)

So take-home for salaries of £41,335 and up =
salary - 11129 - (salary -41335) * .41

i.e.
0.59 * salary + £5818.35

So then
0.59S + 5818.35 = 138.7398R + £10,993.03
138.7398R = 0.59S - 5679.6102

R = 0.004253S - 40.94
OR
S = 235.15R + 5679
So then a £60k salary is a £214 daily rate.
And a £500 daily rate is a £123k salary

So for your original thing:
300 pd = £76k
350 pd = £88k
400 pd = £100k
450 pd = £111k
500 pd = £123k
550 pd = £135k
600 pd = £147k
650 pd = £159k
700 pd = £170k
750 pd = £182k

In other words, if somebody offers you a £60k job with no other benefits, it's beaten by a £225 daily rate.
Things would be more favourable still than this, but for the CT hike to 22%, and the 'income shifting' rules.
If you could utilise your spouse's tax allowance, then the equivalent salaries would be even higher.
BTW, these numbers are just for your own take-home, and ignore void periods, pensions, stable jobs, and what the equivalent rate SHOULD be.
In other words, a £60k job in the market is more like a £400-£450 rate in terms of parity if hiring, even though the latter is actually as good as a £110k job.

Thanks for posting this information. It is really useful.
Do you have an up to date set of these calculations run against all of the current tax rates, CT rates, VAT rates, flat rates, tax bands, etc?
Many thanks

[DaveB]

Thanks for posting this information. It is really useful.
Do you have an up to date set of these calculations run against all of the current tax rates, CT rates, VAT rates, flat rates, tax bands, etc?
Many thanks

Unlikely since this was posted in 2008 and the poster hasn't been online here since December last year.

You could just look up the relevent info and plug that into the calculations yourself.

[northernladuk]

Thanks for posting this information. It is really useful.
Do you have an up to date set of these calculations run against all of the current tax rates, CT rates, VAT rates, flat rates, tax bands, etc?
Many thanks

Lol...