Take home pay

[Mich the Tester]

Hi,

Just registered and was after some advice.....

I have just started contracting so it's all new to me so please forgive me for not knowing much :/

I have just been paid my first months wages for September (5 week month) I earn £13.30ph and work 39 hours per week. Within September I took 4 days off so as my payslip was generated I was looking at 4 weeks and 1 days worth of pay.

The exact brakedown of my wages is seen here:

Week ending Hours Gross pay
26/09/2010: 17 £226.10
19/09/2010: 39 £518.70
12/09/2010: 39 £518.70
05/09/2010: 39 £412.30
29/08/2010: 39 £518.70 Total: £2194.50

So from this amount I pay £28 per week to my umbrella, (But they owed me 1 week free so instead of £140 its £112.)

So thats £2194.50 - £112 = £2082.50

Within this month I had £502.82 worth of tax free expenses so I take that off before I work my Tax and NI off.

£2082.50 - £502.82 = £1579.68

HMRC also told me normally my tax free allowence should be £539 however I am on an emergencey tax code at the miniute so they explained that I just dont take this amount out to work out the tax and ni.

So,

£1579.68 / 100 x 20 = £315.94 to pay for Tax
£1579.68 / 100 x 11 = £173.76 to pay for NI

Add those together £315.94 + £173.76 = £489.70 So thats what I owe on both tax and NI.

So if Ive worked it out correctly

£1579.68 (taxable amount) - £489.70 (tax and ni deduction) = £1089.98 + £502.82 (readded expenses) = £1592.80 take home pay

Thats the way I would work it out and also thats the way HMRC would do it. (Please if i have gone wrong please let me know where)

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The brakedown on my wage slip:

Payslip:
Gross Payments Statutory Payment £0.00
Basic Pay £978.45
Holiday Pay £118.80
Net Profit Bonus £315.66
Total £1,412.91

Less - Deductions Advances £0.00
Employees Social Security £86.43
Employees Tax £371.35
Student Loan £0.00
CSA Deductions £0.00
Attachment of Earnings £0.00
Total £457.78

Add - Reimbursed Expenses
Phone costs £0.00
Travel £117.82
Accommodation £0.00
Hotel/Business Expenses £0.00
Subsistence £385.00
Stationery £0.00
Training/Other £0.00
Total £502.82

Billable Expenses £0.00

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Total Net Pay £1,457.95

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Now I know I should expect less due to the emergencey tax code but even with it I find myself £134.85 down.

Also all my calculations (I spent an hour on the phone to HMRC working out what I should have paid and confirmed the calculations i made above should be correct)

Can anyone tell me if I am mistaken and explain why?

The wage slip above shows all pay and deduction amounts, no hidden charges nothing like that.

Sorry for the long winded post but I am just confused to hell about this.

I would greatly appreciate the help.

Thanks in advance

I don't see a budget for professional indemnity insurance or legal assistance insurance. No insurance for debt collection if your customer refuses to pay (which does occasionally happen), no budget for training, no disability insurance, etc etc.

People who go contracting on rates like this give the industry a bad name. I have to continually explain to clients that I cost more than my competitors in the short term because I have my administraion and tax affairs in order, I am trained to the most modern standards, and I can commit to sticking through the project to the end instead of jumping as soon as someone offers me more; that costs them less money and less risk in the long term. Unfortunately I have to compete with contractors who've just started out of a permie job, all starry eyed about 'earning' something-teen pounds/euros per hour, but without taking the job of running a business seriously. You are running a business, even if you are the only person in that business; start budgetting properly and turn down contracts which can't cover your costs in a responsible way.

Sorry if I seem harsh, because I know you're only starting out, but please learn these lessons quickly or you'll go broke and you'll disappoint your clients.

[gingerjedi]

I don't see a budget for professional indemnity insurance or legal assistance insurance. No insurance for debt collection if your customer refuses to pay (which does occasionally happen), no budget for training, no disability insurance, etc etc.

Uh Mich, if you go with a brolly you're covered.

HTH

[SupremeSpod]

I don't see a budget for professional indemnity insurance or legal assistance insurance. No insurance for debt collection if your customer refuses to pay (which does occasionally happen), no budget for training, no disability insurance, etc etc.

People who go contracting on rates like this give the industry a bad name. I have to continually explain to clients that I cost more than my competitors in the short term because I have my business in order, I am trained to the most modern standards, and I can commit to sticking through the project to the end instead of jumping as soon as someone offers me more; that costs them less money and less risk in the long term. Unfortunately I have to compete with contractors who've just started out of a permie job, all starry eyed about 'earning' something-teen pounds/euros per hour, but without taking the job of running a business seriously. You are running a business, even if you are the only person in that business; start budgetting properly and turn down contracts which can't cover your costs in a responsible way.

Sorry if I seem harsh, because I know you're only starting out, but please learn these lessons quickly or you'll go broke and you'll disappoint your clients.

He's not running a business, he's a techie who just wants to get paid the right amount.

He (as do others) just wants to concentrate on doing the job rather than f**king about trying to justify the existence of his limited company.

[Mich the Tester]

Uh Mich, if you go with a brolly you're covered.

HTH

OK, sorry; almost nobody uses brollies in Holland, except if it's raining. Principle still applies though; no budget for training; how's he going to stay competitive as clients demand this and that certificate?

[Xenophon]

Uh Mich, if you go with a brolly you're covered.

HTH

Yeah, someone who is using a brolly is unlikely to be concerned with 'running a business'.

More tempy than contracty.

[EternalOptimist]

It's a low rate though. Frighteningly low

[Mich the Tester]

He's not running a business, he's a techie who just wants to get paid the right amount.

He (as do others) just wants to concentrate on doing the job rather than f**king about trying to justify the existence of his limited company.

The solution to this is permiedoom or joining a consultancy; sounds like he wants the best of both worlds without making the effort.

[gingerjedi]

It's a low rate though. Frighteningly low

He' doesn't say what he does, it's not bad for a PC porter.

[SupremeSpod]

The solution to this is permiedoom or joining a consultancy; sounds like he wants the best of both worlds without making the effort.

That's his decision. Running a business and being forced to have a Ltd Co just so the bastard agencies will pay you are two completely different things.

[EternalOptimist]

He' doesn't say what he does, it's not bad for a PC porter.

It might be well paid for his skillset, thats not the point.
I cant imagine contracting on it, not by a million miles