Reply to: New Public Sector Rules – take-home pay Calculation question – One for the accountant

[tarbera]

No, assume last contract was in Edinburgh for 12 months

I can claim expenses for London

[fannyadams]

Not quite. The op has worked (from my knowledge) in London for years and this is about expenses.

Expenses are only claimable for 2 years for a location (not a client). Once past 2 years the city is deemed a permanent location and expenses are not allowable.

So in reality there are 3 scenarios that need to be covered here.

New contract outside ir35 (expenses deducted before tax).
New contract inside ir35 (no expenses allowed so don't go for contracts that require them).
New contract outside ir35 but in the city you've been working in for 2 plus years.

I think the OP was only asking about the second scenario. But yes, for comparison purposes, you'd need to look at all three.

[eek]

24 month rule irrelevant - T&S expenses aren't allowable inside IR35.

Not quite. The op has worked (from my knowledge) in London for years and this is about expenses.

Expenses are only claimable for 2 years for a location (not a client). Once past 2 years the city is deemed a permanent location and expenses are not allowable.

So in reality there are 3 scenarios that need to be covered here.

New contract outside ir35 (expenses deducted before tax).
New contract inside ir35 (no expenses allowed so don't go for contracts that require them).
New contract outside ir35 but in the city you've been working in for 2 plus years.

[jamesbrown]

24 month rule irrelevant - T&S expenses aren't allowable inside IR35.

And vice versa, which is eeks point, I assume.

[fannyadams]

Are you including or just outright ignoring the 24 month rule....

24 month rule irrelevant - T&S expenses aren't allowable inside IR35.

[eek]

Flat in London, home and family in Glasgow where I travel from each week

Several contractors will do the same thing

Hotel expenses are are lot more than a flat

Are you including or just outright ignoring the 24 month rule....

[jamesbrown]

Indeed. Would be a brave accountant to come on here and put their reputations on the line attempting to answer anything around the PS debacle.

Case in point: the Apprenticeship Levy will also be deducted by the deemed employer (fee payer) if they meet the requirements (most will), and that is bound to be passed on too.

[northernladuk]

Probably because they don't know either.

Indeed. Would be a brave accountant to come on here and put their reputations on the line attempting to answer anything around the PS debacle.

[cojak]

I was hoping an accountant type would answer my question. As yet no answers here or Ipse

Probably because they don't know either.

[youngguy]

If you take a look at https://listentotaxman.com/120000? this will give you very rough figures. I have left off VAT for ease of calculation, as with the new flat rate scheme changes, it won't change the figures very much anyway. This is if you bill 20 days per month on average and don't pay into a pension. This does not include any umbrella fees etc and uses figures for 2016/2017.

Answer to Q1 - Not including employer NI (£1300), you are looking at ~£6100 per month. Taking off employer NI £4800 per month.

Using the above figures and changing the amount to £60k (average of 10 days per month for 12 months)

Answer to Q2 - Not including employer NI (£600), you are looking at ~£3500 per month. Taking off employer NI £2900 per month.

These figures are very rough and may differ based on the a mount of tax already paid during the year, but both figures used will put you into the higher tax bracket threshold so will be reasonably accurate.

You need to bill an average ~13 days per month to break even on you expenses alone, before your household bills etc.

You'd need a 50% increase in your rate and bill 20 days per month on average to make £3k per month after tax and expenses.

Hope this helps and IANAA, so treat figures with large pinch of salt

Don't forget the agencies WILL pass the employer ni to the contractor ( argument being the employer of the worker is the ltd/PSC and not the agency)

[northernladuk]

Actually..

£10,000 monthly invoice would made up of
Employer NICs : £1130.68
Taxable Income : £8869.32

Of that taxable income, £2754.93 would be Tax, £455.12 would be Employee NICs, leaving £5659.27.

I think you made the mistake of deducting tax and employee NICs from the 10,000 rather than the after employer NICs amount.

Still, with no relief on expenses, the £3600 comes out of the £5660, leaving £2060 at the end of it.

Which doesn't sound worth the hassle of contracting.

The new PS rules pretty much mean either you take a rate 25%-50% higher than before the new rules, or you work local to where you live.

That told him! Love these threads where we run the numbers. 99.9% of the time they are wrong and it gets too confusing to be useful

[doconline]

Actually..

£10,000 monthly invoice would made up of
Employer NICs : £1130.68
Taxable Income : £8869.32

Of that taxable income, £2754.93 would be Tax, £455.12 would be Employee NICs, leaving £5659.27.

I think you made the mistake of deducting tax and employee NICs from the 10,000 rather than the after employer NICs amount.

Still, with no relief on expenses, the £3600 comes out of the £5660, leaving £2060 at the end of it.

Which doesn't sound worth the hassle of contracting.

The new PS rules pretty much mean either you take a rate 25%-50% higher than before the new rules, or you work local to where you live.

OK, as I said I'm not an accountant and the figures quoted were from the referenced website. There would also be umbrella fees to take into account or other fees if going through your own ltd.

All things considered though, doesn't sound level it's worth the hassle.

[b r]

The new PS rules pretty much mean either you take a rate 25%-50% higher than before the new rules, or you work local to where you live.

Yep, certainly spending no more on commuting than an employee would who also has to pay it out of net.

[chopper]

Answer to Q1 - Not including employer NI (£1300), you are looking at ~£6100 per month. Taking off employer NI £4800 per month.

Actually..

£10,000 monthly invoice would made up of
Employer NICs : £1130.68
Taxable Income : £8869.32

Of that taxable income, £2754.93 would be Tax, £455.12 would be Employee NICs, leaving £5659.27.

I think you made the mistake of deducting tax and employee NICs from the 10,000 rather than the after employer NICs amount.

Still, with no relief on expenses, the £3600 comes out of the £5660, leaving £2060 at the end of it.

Which doesn't sound worth the hassle of contracting.

The new PS rules pretty much mean either you take a rate 25%-50% higher than before the new rules, or you work local to where you live.

[doconline]

Say I have a 52 week Contract starting 10th April 2017 with HMRC – I will definitely be IR35 Caught

Daily Rate = £500 – 5 days a week – 9 hour days
No pension Contributions
Vat Registered (standard not Flat rate)
I work away from home and have a London flat that costs £500 per week (have to pay if I am in London or on Holiday or at home)
Other Expenses are £400 a week (Travel + Food etc) – Only pay this out when working (not when on Holiday)
Ignore all other business expenses (accountants, Insurance etc)
Assume already a higher rate taxpayer
Remove VAT if makes calculations simpler as neutral

Question 1

I work 20 days then Invoice for £10K + £2K Vat
Expenses = Flat + other = £3600

What is my net gain for working those 20days (180 hours or work) after expenses and tax

Question 2
I work 10 days (I went off to butlins to ride some donkeys for 10 days) = £5K + £1K Vat
Expenses = Flat + other = £2800

What is my net gain for working those 10days (90 hours of work) after expenses and tax


Thanks in Advance (assume I don’t have an accountant to ask @copyright NLUK)

If you take a look at https://listentotaxman.com/120000? this will give you very rough figures. I have left off VAT for ease of calculation, as with the new flat rate scheme changes, it won't change the figures very much anyway. This is if you bill 20 days per month on average and don't pay into a pension. This does not include any umbrella fees etc and uses figures for 2016/2017.

Answer to Q1 - Not including employer NI (£1300), you are looking at ~£6100 per month. Taking off employer NI £4800 per month.

Using the above figures and changing the amount to £60k (average of 10 days per month for 12 months)

Answer to Q2 - Not including employer NI (£600), you are looking at ~£3500 per month. Taking off employer NI £2900 per month.

These figures are very rough and may differ based on the a mount of tax already paid during the year, but both figures used will put you into the higher tax bracket threshold so will be reasonably accurate.

You need to bill an average ~13 days per month to break even on you expenses alone, before your household bills etc.

You'd need a 50% increase in your rate and bill 20 days per month on average to make £3k per month after tax and expenses.

Hope this helps and IANAA, so treat figures with large pinch of salt