Are my sums correct?

[jchiver]

Hi,

I am looking at moving into contracting and have applied for a position. I am trying to work out why my net income from the contract would be if i got it and i would like some confirmation of my sums if someone could help me.

For the sake of the calculation and to simply the results I will forget anything i have earned in the PAYE world.

The calculations are based on a limited company.

The position pays £315 per day and is roughly 20 weeks long (100 working days). This means the contract will pay £31,500. For simplicity I will not work any additional days for the rest of the financial year.

I will look to pay myself £7,470 over 12 months. This will mean i will pay £259.92 in employee NI

£7,470: Gross Salary
- £259.92: Employee NI
£7,210: Net Salary

I will also claim 10,000 miles in mileage allowance as the site is a 100 mile round trip. At the current HMRC rate this will be a £4,500 expense to the company and paid to my directly without tax.

To recap

Company income: £31,500
- Salary: £7,470
- Employer NI: £956
- Expenses: £4,500
Annual company profit £18,574
- Corporation Tax: £4,047
Dividend Total: £14,527 (no additional tax as i would be under the £35,000 threshold??)

So taking the above into account i could expect to earn the following from this contract
Salary: £7,470
Expenses: £4,500
Dividend Total: £14,527
Grand total: £26,497

I understand that i would need to pay for the petrol out of the above and also it does not take into account accountancy fees etc.

Are my sums correct? Thanks in advance?

J

[Hex]

Hi,

I am looking at moving into contracting and have applied for a position. I am trying to work out why my net income from the contract would be if i got it and i would like some confirmation of my sums if someone could help me.

For the sake of the calculation and to simply the results I will forget anything i have earned in the PAYE world.

The calculations are based on a limited company.

The position pays £315 per day and is roughly 20 weeks long (100 working days). This means the contract will pay £31,500. For simplicity I will not work any additional days for the rest of the financial year.

I will look to pay myself £7,470 over 12 months. This will mean i will pay £259.92 in employee NI

£7,470: Gross Salary
- £259.92: Employee NI
£7,210: Net Salary

I will also claim 10,000 miles in mileage allowance as the site is a 100 mile round trip. At the current HMRC rate this will be a £4,500 expense to the company and paid to my directly without tax.

To recap

Company income: £31,500
- Salary: £7,470
- Employer NI: £956
- Expenses: £4,500
Annual company profit £18,574
- Corporation Tax: £4,047
Dividend Total: £14,527 (no additional tax as i would be under the £35,000 threshold??)

So taking the above into account i could expect to earn the following from this contract
Salary: £7,470
Expenses: £4,500
Dividend Total: £14,527
Grand total: £26,497

I understand that i would need to pay for the petrol out of the above and also it does not take into account accountancy fees etc.

Are my sums correct? Thanks in advance?

J

The way you calculate it looks OK. But there are some things I don't undertand.

Your employer NI on salary of 7470 looks way too high. Why not just calculate it using a salary of 7072? This incurs no employer or employee NI liability.

Your corporation tax looks too high. What rate are you using?

[Fred Bloggs]

<snip>

[jchiver]

The way you calculate it looks OK. But there are some things I don't understand.

Your employer NI on salary of 7470 looks way too high. Why not just calculate it using a salary of 7072? This incurs no employer or employee NI liability.

Your corporation tax looks too high. What rate are you using?

Thanks. I used the calculators on this site to work out the taxes.

I just re-checked my corporation tax using the calculators on this site and it say's its correct. With this in mind and your suggestion on on the NI have update the figures as follows

Company income: £31,500
- Salary: £7,072
- Expenses: £4,500
Annual company profit £19,928
- Corporation Tax: £3,986
Dividend Total: £15,942 (no additional tax as i would be under the £35,000 threshold??)

So taking the above into account i could expect to earn the following from this contract
Salary: £7,072
Expenses: £4,500
Dividend Total: £15,942
Grand total: £27,514

Thanks for your help

J

[Scrag Meister]

Thanks. I used the calculators on this site to work out the taxes.

I just re-checked my corporation tax using the calculators on this site and it say's its correct. With this in mind and your suggestion on on the NI have update the figures as follows

Company income: £31,500
- Salary: £7,072
- Expenses: £4,500
Annual company profit £19,928
- Corporation Tax: £3,986
Dividend Total: £15,942 (no additional tax as i would be under the £35,000 threshold??)

So taking the above into account i could expect to earn the following from this contract
Salary: £7,072
Expenses: £4,500
Dividend Total: £15,942
Grand total: £27,514

Thanks for your help

J

Well I never. You made an extra grand just by posting on ContractorUK.

GL

[Hex]

Thanks. I used the calculators on this site to work out the taxes.

I just re-checked my corporation tax using the calculators on this site and it say's its correct. With this in mind and your suggestion on on the NI have update the figures as follows

Company income: £31,500
- Salary: £7,072
- Expenses: £4,500
Annual company profit £19,928
- Corporation Tax: £3,986
Dividend Total: £15,942 (no additional tax as i would be under the £35,000 threshold??)

So taking the above into account i could expect to earn the following from this contract
Salary: £7,072
Expenses: £4,500
Dividend Total: £15,942
Grand total: £27,514

Thanks for your help

J

These calculations look correct to me. Be careful about treating your expenses as income though. If you've claimed £4,500 in expenses you must have have actual had £4,500 of expenses that you paid out.

[jchiver]

These calculations look correct to me. Be careful about treating your expenses as income though. If you've claimed £4,500 in expenses you must have have actual had £4,500 of expenses that you paid out.

Thanks.

Regarding the £4,500. I will travelling 100 miles a day so will soon reach this and then some more.

[DodgyAgent]

Well I never. You made an extra grand just by posting on ContractorUK.

GL

I will soon have it off him