Equivalent Day Rate

[northernladuk]

My reason for considering contracting is because I am being offered a position at £450 a day which taking into account 28 days holiday and weekends would give me a salary of around £101k.

No it wouldn't. It would give you a salary of about 10k. Are you taking in to account sick days, public holidays and possible bench time on that as well?

But Wouldn't I be paying far less tax (20%??) and so take home pay would be greater than my current role?? My current take home pay is ~£4,500

Nope, calcs above show this. Remember you take home that even when you are on holiday and bank holidays etc.

There is also a lot of speculation about my current company and whether they are about to pull the plug etc. So, as I have an opportunity potentially lined up I am trying to decide whether to jump ship now, or ride it out.

Again thanks for all the replies!

Up to you that one I guess but I am not seeing much benefit to go contracting in this thread.

[Bunk]

My calculations for 100k earnings, flat rate vat @13.5% and expenses of 10k, salary of £8,400 come out to about 79.5% retention of my day rate.
I could be missing something though.

LtdCo           Me            HMRC
---------------------------------------
120                 0                                      //Revenue
106.5                             13.5                // Minus VAT
96.5                10                                    // Expenses
88.1                18.4                                 // Salary
70.48                             17.62              // CT
37.48               51.4                                 // Basic rate divi  
0                   88.88                               // higher rate divi
                    79.51         9.37               //  higher rate tax

Here's what I get with your figures:

Turnover                £120,000 inc VAT
VAT                     £120,000 - 16,200 = 103,800
Salary                  £103,800 - 8,400 = 95,400
Expenses                £95,400 - 10,000 = 85,400
Corporation Tax         £85,400 - 17,080 = 68,320
Basic Tax Band          £68,320 - 0 (tax) - (£29,745 divs) = 38,575
Higher Tax Band         £38,575 - 9,643.75 (tax) - 28,931.25 = 0

Total takehome = 8,400 salary + 29,745 + 28,931.25 = 67,076.25
Inc expenses = 67,076.25 + 10,000 = 77,076.25

I've ignored NIC because they'll be pretty low on that salary and I can't be bothered working it out.

The 67k figure is the one I'd pay attention to, because that's the cash you'll actually have. Including expenses always seems pointless to me because you've already spent them.

Disclaimer: IANAA

[SpontaneousOrder]

Here's what I get with your figures:

Turnover                £120,000 inc VAT
VAT                     £120,000 - 16,200 = 103,800
Salary                  £103,800 - 8,400 = 95,400
Expenses                £95,400 - 10,000 = 85,400
Corporation Tax         £85,400 - 17,080 = 68,320
Basic Tax Band          £68,320 - 0 (tax) - (£29,745 divs) = 38,575
Higher Tax Band         £38,575 - 9,643.75 (tax) - 28,931.25 = 0

Total takehome = 8,400 salary + 29,745 + 28,931.25 = 67,076.25
Inc expenses = 67,076.25 + 10,000 = 77,076.25

I've ignored NIC because they'll be pretty low on that salary and I can't be bothered working it out.

The 67k figure is the one I'd pay attention to, because that's the cash you'll actually have. Including expenses always seems pointless to me because you've already spent them.

Disclaimer: IANAA

I couldn't be bothered to work out the NICs either, hence paying myself £700 instead of something slightly less.
Looks like the difference is in the VAT rate - i thought the flat rate would be 14.5% (13.5 in my first year).


I always include the expenses because they're largely travel for me which i'd have to stump up for as a premie too to a large extent unless I was on client site. Perhaps I should account for only 5k of those expenses being 'profit'.
I only worked it out so that I could get a rough idea of how much cash i can expect to have at some future date (garden to get landscaped, kitchen falling to bits etc, etc), so I'm not to fussed about the exact number in comparison to my premie roles as I've already earned over a year's salary since november. For some reason my other half isn't keen on me taking the next 7 or 8 months off though

[Bunk]

I couldn't be bothered to work out the NICs either, hence paying myself £700 instead of something slightly less.
Looks like the difference is in the VAT rate - i thought the flat rate would be 14.5% (13.5 in my first year).


I always include the expenses because they're largely travel for me which i'd have to stump up for as a premie too to a large extent unless I was on client site. Perhaps I should account for only 5k of those expenses being 'profit'.
I only worked it out so that I could get a rough idea of how much cash i can expect to have at some future date (garden to get landscaped, kitchen falling to bits etc, etc), so I'm not to fussed about the exact number in comparison to my premie roles as I've already earned over a year's salary since november. For some reason my other half isn't keen on me taking the next 7 or 8 months off though

VAT would be 13.5% of 120k which is £16,200.