Take home percentage in UK/London

[frosty]

I am starting to look around for the next contracting gig, and am considering the UK, mainly London.

However, I am not familiar with the British tax-system, so I am unsure what to expect. I found the calculator here: Umbrella Company Tax Calculator

If I enter my expected daily rate, I end up with about 80% take home percentage. For a citizen of the United Communist States of Scandinavia, who has to get by with whatever miserable scraps are left when the taxman lets you put your pants back on, that sounds like something out of a fairytale.

However, it also says something about tax codes and I could be misunderstanding something.

So...

If a foreigner (EU citizen) comes to the UK as a contractor for a year, and either goes under an umbrella or sets up a company for himself, what kind of take-home percentage can you expect (ballpark figure)?

[amcdonald]

70-80% take home depending on expenses and IR35 status, if you choose a limited company read upon IR35 first

An umbrella company will be less paperwork, but if you are outside IR35 you should get a higher take home

[SueEllen]

Depends on your expenses.

You can actually achieve a higher take home from a limited than a legit umbrella company. I strongly suggest you try and stay here for a couple of years if you are going to set up a limited. There are some good accountants on this board who will answer your questions but start by reading the information under CUK Navigation then search these forums. (The best way to search is through google.)

With an umbrella your take home is less but you don't have to do so much paperwork, hire your own accountant (which you need to do from the start), read your contracts and get them professionally reviewed. An umbrella company may make it difficult for you to claim expenses like laptops and will control what expenses you can claim.

Another thing with umbrella companies is that agencies can force you to only use one of theirs on a list. This is partly to make sure the umbrella company is legit and partly because they get a kick back.

[Old Greg]

75% is about right for a Ltd outside IR35.

[No2politics]

Don't forget higher rate of tax. My accountant failed to explain this properly when I first started contracting. He said u could take home circa 80%.

What he should have said is that you can take home 80% so long as you don't pay yourself so much in dividends that it takes you over the higher rate of tax band. Because when you do your self assesment a nice little surprise personal tax bill will await you.

Needless to say five years down the line after poor service, slow response and general incompetence I have sacked my fk wit accountant and moved to nixon Williams.

[Wanderer]

I found the calculator here: Umbrella Company Tax Calculator If I enter my expected daily rate, I end up with about 80% take home percentage.

That calculator is completely wrong.

Have a look at this one instead. Take a look at the "Detailed breakdown", if you can claim legitimate expenses (see the First Timers guide and other things on the right side of the page) then the tax will be a little lower.

You also need to understand if you are liable for tax on your worldwide earnings in your home country - you may not be due to dual taxation treaties? You definitely need to speak to an advisor in your home country and understand the time limits which may apply to you. Also, if you do a short contract in the UK then you may not become tax resident here, though you will probably have to pay (a lot) of tax at home.

Your IR35 status will be a grey area, you need to do some research and understand how to get professional IR35 advice in the UK as it makes a huge difference to your tax bill.

If a foreigner (EU citizen) comes to the UK as a contractor for a year, and either goes under an umbrella or sets up a company for himself, what kind of take-home percentage can you expect (ballpark figure)?

£400/day for 44 weeks = £88,000 gross. Tax on that would be ~25% for a LTD company or ~40% for an umbrella. Possibly a bit less if you arrive in the middle of the tax year which runs from 6th April till 5th April the next year.

So that's about £6300/month LTD or £5,000 Umbrella for a typical month where you would work 21 days. Bear in mind that with contracting, what you see is what you get and there is no job security/sick pay/annual leave/maternity pay/pension etc. Contractors typically keep enough money to cover at least 6 months living expenses as a "war chest" should something go wrong.