Quick little help on tax / expenses

Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

You are not logged in or you do not have permission to access this page. This could be due to one of several reasons:

You are not logged in. If you are already registered, fill in the form below to log in, or follow the "Sign Up" link to register a new account.
You may not have sufficient privileges to access this page. Are you trying to edit someone else's post, access administrative features or some other privileged system?
If you are trying to post, the administrator may have disabled your account, or it may be awaiting activation.

NotReallyButSeriously replied

11 April 2011, 21:25
Originally posted by VectraMan View Post

You deduct the 12.8% Employer's NI from your "taxable income", which gives you your personal gross taxable income, equivalent to what a permie would get. Then you work out your income tax and employee's NI from that value. Of course you have to account for all the allowances and thresholds (NI reduces to 1% above a certain amount). Look it all up on HMRC's website.

On £1000 per day with an umbrella you'd probably be paying pretty close to 50% tax.

yeah I just used £1000 because it's a nice number and easy to work with.

So would I be right in thinking this...

£1000.00 - RATE minus
£80.00 - EXPENSES minus
£920.00 - TAXABLE INCOME
£184.00 - TAX

£1000.00 - minus
£117.76 - NI minus
£184.00 - TAX equals
£698.24 - TAKE HOME
Leave a comment:
VectraMan replied

11 April 2011, 20:49
You deduct the 12.8% Employer's NI from your "taxable income", which gives you your personal gross taxable income, equivalent to what a permie would get. Then you work out your income tax and employee's NI from that value. Of course you have to account for all the allowances and thresholds (NI reduces to 1% above a certain amount). Look it all up on HMRC's website.

On £1000 per day with an umbrella you'd probably be paying pretty close to 50% tax.
Leave a comment:
NotReallyButSeriously started a topic Quick little help on tax / expenses

11 April 2011, 20:03
Quick little help on tax / expenses

So this is my second contract so my knowledge isn't great on the subject, I'm trading through an umbrella (Parasol).

say for instance my daily rate was £1000 (to keep things simple and lets make it 20% tax because that's what I'm on right now), and my expenses amount to around £80 per week. Am I right in thinking the following.

£1000.00 - RATE minus
£80.00 - EXPENSES equals
£920.00 - TAXABLE INCOME
£184.00 - TAX

£1000.00 - minus
£184.00 - equals
£816.00 - TAKE HOME

Am I meant to deduct NI before or after tax? Is this the correct calculation? I've had a look at the calculators, but want to figure it out for myself so I understand it.

Also how much does NI work out to? I figure I need to pay employee and employer NI, is there anything else I'm missing?

Thanks for all the help have a infinite symbol - ∞
Tags: None