Reply to: SJD Calculator

[The Lone Gunman]

Simon will probably take this on board and change the web page to read something like "calculations are based on a 40 hour week, 52 week year with a base salary of x and expenses of n".

If it realy is that confusing.

[floatsy]

I wonder about some of you guys!
Surely you are smart enough to realise that the less detail the calculator requires the less accurate it is going to be?

Surely you can not expect a web based application to know details you dont enter?

Come on!

All the guys I work with do a basic calculation as a rule of thumb which is basically 40 hours a week 45 weeks a year and max take home of 85%.

Sure, that's cool - not the issue in terms of expecting an exact figure. Obviously that will be dependant upon the individual and their particular circumstances (and bravery )

All that was asked for was some context - which the above does provide.

It's easier when one has been in the game but for complete newbies, in a flash of the pan situation, even the most obvious ABCs are good things.

That is why agents like 1stcontact can get business - they flash around big numbers but don't mention the little ones. It matters.

So fair enough, but as I said, was just going for context.

Cheers

[The Lone Gunman]

I wonder about some of you guys!

There are lots of calculators out there that give all kinds info.
BUT
Surely you are smart enough to realise that the less detail the calculator requires the less accurate it is going to be?

Surely you can not expect a web based application to know details you dont enter?

Come on!

All the guys I work with do a basic calculation as a rule of thumb which is basically 40 hours a week 45 weeks a year and max take home of 85%.

[Waldorf]

You do need to be careful with quotes, when I started I got one from Danbro and they didn't include any higher rate tax in the figures. They can be a good guide but know their limits

[2uk]

look like it "assumes" lots of things. 1 is a either a 6 day working week or 10 hour working day.

[floatsy]

You realise that the quote you've found wasn't mine?

Yes of course.

I think you were down further saying something yes, there can be variances but maybe around 70% but the above is clearer to me.

The calculator on your site provides is a marketing tool bringing in the catch.

But as I said, I am looking for clarification on how wide the variance can be, especially when decisions are made on this basis.

For example, does it assume I am working the full year, does it assume that I am earning 20K etc etc. These are all significant factors which will affect an estimate, and people will make decisions based on it.

So it's important, IMO, to provide some clarification and to inform people that there can be significant variance.

Nevertheless, as I said, understand that it is probably a highly effective SJD marketing tool, rather than anything else. I'm sure it brings in a lotta people for you.

Kudos to your skills.

[simondolan]

You realise that the quote you've found wasn't mine?

I found an old thread - so this provides the context I was looking for:

[floatsy]

I found an old thread - so this provides the context I was looking for:

Simon

You say that "Your take home pay using your own Limited Company is usually in excess of 80%"

I think it's important to note that this is only for low paid contractors who do not fall into the 40% bracket (or not by much). For contractors earning more I would believe that the take home pay is more like 65% because they then pay dividend tax at higher rate of 40%.

So someone on contract value of £50k will get a return of ~ 80%
Someone on contract value of £100k will get a return of 65% - 70%

Having said that, it's still better than PAYE.

Please enlighten me if I am missing something obvious here.


Thanks.

[simondolan]

Yes - the savings of using a Ltd over an Umbrella are indeed very significant - 20% would be right assuming you fall outside IR35.

No way the return from a Ltd would go down to 60% (assuming outside IR35) unless you paid all of the income out as salary.

Simon - It's good to have you here.

Using your calculator, and an assumption that take home pay could be 75% - against an umbrella take home of 55% or so - is clearly very significant.

So just as you have suggested it could be 85% could it also go down to 60%?

It seems that the calculator then is just a very high level range. Which is fine.

Just that as I am reviewing decisions based against it, the context is good to have.

Thanks,
float

[floatsy]

Thanks, Alan, that makes sense, and that is my real point - it's important to know the context when making decisions otherwise I'm flying blinder than I need to. So I just sought clarification on this. Thanks.

[Nixon Williams]

The percentage that you can expect to retain depends upon many factors, each case will be different.

When we are asked to "quote" some of the questions we would consider (apart from simply what rate you are on) would include:

a. whether IR35 applied to the contract
b. what travel costs you might incur
c. what salary is taken
d. whether Flat Rate VAT is applicable

Our net amount would give the amount after all taxes, both company and personal taxes.

It is vital that if you intend to compare that you compare like with like, the tax rules are the same for everyone!

Some schemes quotes are based on the contractor only taking upto the higher rate threshold and then applying for a concession from HMRC to close the company. This is not guaranteed.

Alan

[floatsy]

Simon - It's good to have you here.

Using your calculator, and an assumption that take home pay could be 75% - against an umbrella take home of 55% or so - is clearly very significant.

So just as you have suggested it could be 85% could it also go down to 60%?

It seems that the calculator then is just a very high level range. Which is fine.

Just that as I am reviewing decisions based against it, the context is good to have.

Thanks,
float

[floatsy]

65% is way too low - the "accountants" that told you this wouldn't be just offering umbrella services would they now??

No they are the other major accountancy here.

[simondolan]

It does.

i don't think the SJD calculator takes into account the tax due on dividends over the income threshold.

[simondolan]

The calculator is a guide - nothing else.

It represents a reasonable take home pay based on a little bit of simple tax planning. Everyone has different expenses, incomes, drawdown requirements and so on.

75% is actually quite a conservative figure - we can easily show 83% best case scenario.

65% is way too low - the "accountants" that told you this wouldn't be just offering umbrella services would they now??

Hi - I understand that SJD and Nixon Williams etc are held in high regard on this forum, and thus don't doubt their professionalism and service.

That said, I have a genuine query then on the SJD calculator.

http://www.sjdaccountancy.com/contra...tor/index.html

Using this, it gave me a take home rate of 75% for my take home component.

However, my understanding - after more investigation is the difference between LTD and UMBRELLA is actually just about 10%.

This is on the advice of another accountancy firm here (which said take home pay is just at 65% for LTD) - so my question is - where is the discrepancy occurring?

Is the SJD calculator actually reflective?

Thanks for any experiences/perspectives shared.

float