More detail on take home calculations

[Beefy198]

Any thoughts on how reliable an accountant's advice is on IR35 status when they are trying to win your business??

My best advice is call a couple (it's good to check they've even heard of IR35! Some haven't believe it or not).

If you can you might also want to get your contract reviewed through a company like QDos

[callthecops]

Well that's pretty much my point...

The numbers in simonsjdaccountancy’s sticky are all based on 3 year contracts, which he says is the average contract length.

From my (limited) experience, I'd say 3 to 6 months is much more standard, especially when starting out.

Hence the need for more relevant/meaningful numbers for us novices.

[Ardesco]

While the average contract length may be 3 years

Don't you mean three months rolling......

[callthecops]

Thanks Beefy

Happy to have a go at working it out myself, was just wondering if another poster had already produced a summary or combined tool for newbies like me who don't really know how it all works...

Based on my contract, I've calculated that from a gross 6m value of around £45k, I'd net...

£28,600 using an umbrella
£36,800 running a ltd co (non-IR35)

I can't get the IR35 tool to produce similar numbers, but it seems that being caught by IR35 is likely to cost around £1000 per month.

I suppose the only other factor is the running costs. They seem to be included for the umbrella tool but not for the ltd co, so assuming say £1000 accountant + company formation + other costs (for 6m), I've come to:

£28,600 using an umbrella
£35,800 running a ltd co (non-IR35)
£28,800 running a ltd co (IR35)

So for my particular example it seems the real question is whether IR35 applies - if so, guess umbrella is the best option, if not, need to set up a company.

Any thoughts on how reliable an accountant's advice is on IR35 status when they are trying to win your business??

Thanks again.

[Beefy198]

There's a few calculators on the web that will help with exactly this. This one will tell you how much you're "losing" under IR35, this one will let you know how much you can expect to take home using an umbrella and finally this one will help you understand how much you could take home using your own ltd.

Hope that helps, I have a feeling plenty of people on here will tell you to work it out yourself anyway!

[callthecops]

Hi - I’m new to all this so please excuse any ignorance on my part.

Having read simonsjdaccountancy’s very useful sticky and other related forums, I'm still unsure which option is best for me.

For me (and most others entering the contractor market I guess) the initial choice of whether to go down the Umbrella or Ltd Co route is based on my expected IR35 status and which option will net me the best overall returns for my initial contract.

While the average contract length may be 3 years, I’m not sure that that reflects the reality most first-time contractors face. What would be really useful is a summary of the typical returns you’d see for a few different typical day rates (say £250, £350 and £450 – not sure how close to an average these are?) as follows:

Contract Umbrella Ltd Co (Inside IR35) Ltd Co (Outside IR35)
3 months
6 months
12 months

Ideally this would include typical admin fees associated with using an umbrella and accountancy fees + company registration, etc costs associated with running your own ltd company.

Is this feasible or am I missing something quite basic?

I have spoken to an accountant and they tell me that Ltd Co would be best for me, but not sure how accurate or reliable this is (they would say that, wouldn’t they?). I’m starting a 6 month contract at £350 per day, but am dubious that I’m inside IR35, despite what they tell me.

Any and all response to this welcomed.

Thanks