Example cash flow

[jgy6000]

Thanks, original post edited for acuracy!

[VectraMan]

Pay myself a salary of £891.04 (£10692 for year)

So out of the £40,000 I’m drawing £20,292 as a salary

Which is it?

So my net gain from salary/expenses/ dividends is £33,945.25 into my personal bank account

Surprised nobody picked that up. Expenses aren't a net gain. They're neutral (although in reality you can gain a bit). So your net gain is whichever figure you decide on for you salary, plus the dividends, minus any tax you have to pay on the dividends if you go into the upper rate (which you won't on those numbers).

[jgy6000]

Thanks for the feedback everyone

The 50 working weeks was just and axample for the sake of the calculation and simplicity, and so was the expenses. I understand i will probably work less and my expenses will fluctuate month to month. Same again for the banking, if its free then thats fine.

What i wanted to gain from my first post was if the methodology of the cashflow was correct and i hadnt missed anything

Thanks

[TheFaQQer]

Expenses of £800pm seems a bit high. Even when I was commuting into London I wasn't taking that much out for expenses.

Expenses of £800pm seems a bit low. When I was working on a project in London I was taking that much out for rent each month.

[Contreras]

Things you may not have considered:

VAT, and extra profit from the flat rate scheme.

As a small/startup business you shouldn't need to pay a penny for banking.

Assuming contracts outside IR35, your suggested salary is not the most efficient - see http://forums.contractoruk.com/accou...ml#post1709579

You'll be needing an accountant anyway, so why not set up a few appointments and have someone run through the basic numbers with you?

[northernladuk]

Also you'll probably want to leave some of the profits in the company, eg to cover accountant fees, salary etc due before your next invoice gets paid.

If you are starting out you want to take as little as possible until you have 4 - 6 month warchest in the company as well as the above.

If you spend everything you take in you are going to have a very sweaty time when you hit the bench... which is likely to happen, particularly when you are new. Your model should show what you can do once you have a good warchest built up.

[geoffreywhereveryoumaybe]

Wouldn't assume you will have 50 productive weeks, you will only have an idea after you have clocked up a few assignments and see how you do.

The £20K salary figure was adding expenses and salary together and you have to realise that expenses aren't a given; they are personal expenses that get reclaimed so not money for nothing and also not money when not on a contract - in your example you work for 50 weeks but incur expenses for 12 months.

You also need to take into account that corporation tax gets taken out much later on after the end of company year.

But apart from the expenses you seem to have a reasonable grasp of the flow.

[javadude]

I guess this is a "how much will I get if I contract exercise"?

Expenses of £800pm seems a bit high. Even when I was commuting into London I wasn't taking that much out for expenses.

£600pa for an accountant is low, you won't get much of a service for that money, think more £1,200.

Also you'll probably want to leave some of the profits in the company, eg to cover accountant fees, salary etc due before your next invoice gets paid.

[northernladuk]

Have you tried something like this..

Limited Company Calculator: Calculate corporation taxes and profit

[northernladuk]

My other comments...

50 weeks is a bit on the high side. There are bank holidays, your holidays, companies shut down over xmas and being out of contract to consider. I would certainly bring that down if I wanted a more realistic figure. I tend to try and live on 10 months a year and if I get more it is a bonus. Try your figures with around 46 weeks work.

You salary can be reduced to reduce the amount of tax. There is a thread going on right now about how much you can pay yourself

You expenses seem a little high. Are you planning on staying away from home, buying a lot of kit?

Don't quite understand why you say £10k salary at first then 20k salary further down?

[kingcook]

I dont pay anyone anything hence the "I have an example below which is completly made up" bit....

Thanks for your constructive input into the thread though, its much appreciated!

Why the hell do you want some stranger to go through some made up figures?

[jgy6000]

Have you checked with the guy that you are paying £600 a year to?

I dont pay anyone anything hence the "I have an example below which is completly made up" bit....

Thanks for your constructive input into the thread though, its much appreciated!

[northernladuk]

Have you checked with the guy that you are paying £600 a year to?

[jgy6000]

Hi All,

I would just like to confirm that i have got the correct grasp of the general cash flow of running a LTD company as a contractor. I have an example below which is completly made up. Have a worked it out correctly?

Thanks

contract rate £20 ph

contract for 40hrs a week for 50 weeks a year

total money into the business account is £40,000


Pay myself a salary of £891.04 (£10692 for year) and pay NI and Tax of £161.12 every month (£1933.44 for year)

accountant for the year is £600

and bank and insurance for year is £108

I take expenses of £800 per month (£9600 a year)


So out of the £40,000 I’m drawing £20,292 as a total salary and expenditure
HMRC take £1933.44 for Tax and NI
Insurance and bank and accountant £708

total out of the account is £22,933.44


left over in the business account is £17066.56

Of which I pay corporation tax on at 20%? Which is £3413.31

so I can draw out as dividends a maximum of £13653.25?

So my net gain from salary/expenses/ dividends is £33,945.25 into my personal bank account