Reply to: Tax in 2015-16

[Contreras]

benefits such as health are, sick pay, hols, etc. ...

... all can have a cash value attached.

Less tangible are the opportunities (and effort) of operating as a business vs. a wage slave.

The problem is that contracting through a Ltd is a lifestyle choice.

The question is still a valid one but the answer is largely academic.

[jamesbrown]

PS However, have been made aware of such offshore schemes that "apparently" pay 86% of gross, without the hassle of accountants, claiming expenses, etc.

Your inability to listen or understand is beginning to make sense. What dodgy offshore scheme are you promoting? If you aren't, them stop being a muppet and read this. You don't really sound able to research or understand your options properly so, if you're a legitimate poster, I'd suggest you forget about tax (which is hardly the point of contracting anyway) and start with a legitimate (as in, not dodgy/offshore) umbrella company. Speak to Lisa at ContractorUmbrella, for example.

[dugs]

I realise where they are from. Yes a 100k salary provides 65 ish. But 100k on salary and mandatory costs would only enable 88k salary.

believe it or not I am simply trying to make a fair comparison to the implied question of "if the co pays a total of 100k for my services how much do I get as staff, how much might I get as company". (I think this is a reasonable and valid question and a fairly reasonable comparison resulting in answers of 59k and 67k)

Equally I am aware of the 80k figure and the assumptions made. Again I was merely pointing out that a fair chunk of the improvement will definitely be eradicated by next years tax changes. Also a non earning partner is required, likely specifically spouse or legal equivalent is required.

Thanks for the clarification.

Many have said I am comparing apples and pears because a permie on £100K also get benefits such as health are, sick pay, hols, etc. but all those (unless you have a flexible benefits package) cannot be converted to cash.

So I'm comparing salary alone (perm) v max ie 250 days a year revenue (contracting).

My conclusion is to include my spouse as shareholder, though that won't help to avoid paying tax for the £ earnt in this and previous year.

PS However, have been made aware of such offshore schemes that "apparently" pay 86% of gross, without the hassle of accountants, claiming expenses, etc.

[ASB]

I realise where they are from. Yes a 100k salary provides 65 ish. But 100k on salary and mandatory costs would only enable 88k salary.

believe it or not I am simply trying to make a fair comparison to the implied question of "if the co pays a total of 100k for my services how much do I get as staff, how much might I get as company". (I think this is a reasonable and valid question and a fairly reasonable comparison resulting in answers of 59k and 67k)

Equally I am aware of the 80k figure and the assumptions made. Again I was merely pointing out that a fair chunk of the improvement will definitely be eradicated by next years tax changes. Also a non earning partner is required, likely specifically spouse or legal equivalent is required.

[dugs]

All the info and rates you need are in the thread I linked to. Teach a man to fish and all that. However from my head.....

Income 100,000. Salary 10,000. Profit 90,000. Ct 18,000. Dividend 72,000. Additional dividend tax next year 14,700.

Net - 10,000 + 72,000 - 14,700 = 67,300.

This is approximate. There is a bit of ni on the salary. About 500 overall.

If you have a partner it may be improved by income splitting if appropriate. If its in ir35 it will be different. (Split evenly between 2 with no salary going to the partner and them having no other income would result in 4500 div tax I think. So 10k better moving thee rention up to 73k net).

if the 100k was providing a salary inclusive of ers ni then it comes to about 59k.

Feel free to dispute/query the figures. Though saying why you think they are wrong would obviously be some help.

I dont know where you get the 65k permie from ( though I suspect I do). Or indeed the 80+ since that would imply no additional personal tax which would require at leasr 3 shareholders (though it could possibly be achieved with er if that regime does ot change).

Thanks for your calc.

FYI, the £100K gross = £65K net is taken from here:

http://www.icalculator.info/tax_calculator/2016.html

The £81K figure was from another reader on this thread.

[ASB]

In response to the question of costs, etc. I am assuming, unrealistically, £0 costs, ie no pension payments, car allowance, accountancy fees, etc. to keep the calculation simple.

I know it's not sensible to compare £100K perm job to revenue of £100K as a contractor but I am just seeking a "best case" scenario of what to expect to be able to take home from £100K revenue.

One response from a reader already quoted £81K. If so, that is significantly more beneficial than £65K as a permie and therefore more worthwhile in my opinion.

All the info and rates you need are in the thread I linked to. Teach a man to fish and all that. However from my head.....

Income 100,000. Salary 10,000. Profit 90,000. Ct 18,000. Dividend 72,000. Additional dividend tax next year 14,700.

Net - 10,000 + 72,000 - 14,700 = 67,300.

This is approximate. There is a bit of ni on the salary. About 500 overall.

If you have a partner it may be improved by income splitting if appropriate. If its in ir35 it will be different. (Split evenly between 2 with no salary going to the partner and them having no other income would result in 4500 div tax I think. So 10k better moving thee rention up to 73k net).

if the 100k was providing a salary inclusive of ers ni then it comes to about 59k.

Feel free to dispute/query the figures. Though saying why you think they are wrong would obviously be some help.

I dont know where you get the 65k permie from ( though I suspect I do). Or indeed the 80+ since that would imply no additional personal tax which would require at leasr 3 shareholders (though it could possibly be achieved with er if that regime does ot change).

[handyandy]

As a former contractor who has been a permie for the last 5 years or so I can confirm that if you get paid 15 apples as a contractor and compare it with 12 oranges as a permie then you are approximately 1.5 grams of crack cocaine better off each month.

[northernladuk]

You continue to follow this despite all the comments made about it's validity I'd say you are the only one that really cares about your opinion. Glad you are happy though so now this thread can die

[dugs]

In response to the question of costs, etc. I am assuming, unrealistically, £0 costs, ie no pension payments, car allowance, accountancy fees, etc. to keep the calculation simple.

I know it's not sensible to compare £100K perm job to revenue of £100K as a contractor but I am just seeking a "best case" scenario of what to expect to be able to take home from £100K revenue.

One response from a reader already quoted £81K. If so, that is significantly more beneficial than £65K as a permie and therefore more worthwhile in my opinion.

[SussexSeagull]

To be honest if you are that convinced you are better off as a permanent employee then that is the best way forward for you.

[jamesbrown]

And that is also impossible since everybody has a different package. An estimate might be 100 er ni 12 bonus 10 nc pension 10 car allowance 8 life ins 1 health 1 total 142.

Obviously. The question is flawed. But if the OP insists, the ER NI needs to be factored as a minimum.

[ASB]

FFS. Several people have told you that your question is meaningless. A 100k employee is not, in any way, comparable to a business with a 100k turnover. If you want to make any sort of sensible comparison, you need to start with the total cost of a 100k employee to that business.

And that is also impossible since everybody has a different package. An estimate might be 100 er ni 12 bonus 10 nc pension 10 car allowance 8 life ins 1 health 1 total 142.

[jamesbrown]

FFS. Several people have told you that your question is meaningless. A 100k employee is not, in any way, comparable to a business with a 100k turnover. If you want to make any sort of sensible comparison, you need to start with the total cost of a 100k employee to that business.

[BrilloPad]

So if a perm employee on £100K gross takes home £65K, what is the maximum figure a contractor with £100K revenue can take home (forget pensions, etc.)?

Thanks

Is income splitting allowed? How much does accountant cost? How much T&S is allowed?

Assuming the answers are yes, 0, 0 I reckon you and your partner can take home £81k.

Don't forget if you use the BrilloScheme you can take take home 95k! It is QC certified. Well I am certainly certified and you should be too if you attempt any aggressive avoidance. Unless you are a MP....

[dugs]

The biggest difference, bigger than the difference in national insurance itself and which people ALWAYS miss, is this:

It's a lot easier to get a job paying 100k before tax to a limited company that can be terminated immediately, than it is to get the same as a normal PAYE job, with holidays, sick pay, redundancies and benefits to pay for, because it costs about 2x Salary to employee someone in the UK and be able to account for all of these things.

If you're willing to take the risk on the latter (and pay for your own holidays as and when needed) the extra money, rather than being spent on someone's maternity leave or paying off some rubbish worker's 'redundancy', goes to you.

That is why - unless you're on a crap day rate - contracting is better.

I agree that's it better to be in a £100K perm role than £500 a day contracting.

My numbers were to assume I "maxed" everything, ie worked around 250 days a year and not take any expenses (unrealistic I know).

Contractors are short term, so to compensate that, they ought to have additional reward, such as financial but from what I've seen, going forwards in the tax year 206-17, there's very little benefit going contracting.

I am seeking an absolute final figure:

So if a perm employee on £100K gross takes home £65K, what is the maximum figure a contractor with £100K revenue can take home (forget pensions, etc.)?

Thanks