Reply to: Rate rise but still take home same amount

[SpontaneousOrder]

State which parts indicates I don't understand dividends/tax bands etc? No one on here has contradicted what I have said.

So why do you ask such pointless questions then? Or are you just thinking out loud? (i.e. wasting people's time)

[heyya99]

2 years !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!

And you still dont understand dividends/tax bands etc.

State which parts indicates I don't understand dividends/tax bands etc? No one on here has contradicted what I have said.

[psychocandy]

Contracting seems to be a good gig for long term planning. I realistically am not going to see the big benefit until I close my company and take the cash.

Yes but if you take £100K out of the company (be it dividends/salary) or earn £100K as permie you're still going to be in upper tax bracket and pay tax accordingly.

[psychocandy]

The reason for my thread is that I've been contracting about 2 years now and I'm trying to reflect on the success of it, whether it's worth doing long term or if I should return to perm.

2 years !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!

And you still dont understand dividends/tax bands etc.

[psychocandy]

Fair enough, my question was pretty basic but my aim was to find out how I can get more funds out of my company without incurring high tax. I already pay a high pension and do not have a partner so looks like I am doing the most I can.

I have spoken to my accountant on this issue but getting a second opinion is valuable.

Are you married? If so, does wife have own income or low income? splitting dividends may be an option but speak to your accountant.

Apart from that no I dont think so. Of course, you dont have to pay the money out to yourself personally - you can pay into pensiuon, or just keep in the company.

[TheFaQQer]

Contracting seems to be a good gig for long term planning.

Until the market takes a dive and you can't find a contract for six months. Unless you planned for that, of course.

[kal]

That's not very tax-efficient.

Whoosh!!!

[heyya99]

On 450 day I stayed at the Premier Inn at 480 at the Holiday inn. At 1000 day I would hire a helicopter to take me to work.

That's not very tax-efficient.

[SpontaneousOrder]

I don't get this thread.

[Brussels Slumdog]

I got a £65 rate rise with my contract extension - but am still paying myself the same income as I was before the rise. To make my business tax efficient, I take a minimal salary and a tax-free dividend. My accountant tells me that if I take a larger dividend, I will be paying 25% tax on it.

To be tax efficient, am I correct in saying a contractor on a day rate of 400 will be taking home the same as a contractor on 1000?

On 450 day I stayed at the Premier Inn at 480 at the Holiday inn. At 1000 day I would hire a helicopter to take me to work.

[TykeMerc]

In pure financial terms yes, if you're dead set on best tax efficiency.

There are however other benefits (and risks) to contracting as a career path, I get a good deal more out of working the way I do than just the money side.

[vwdan]

Contracting seems to be a good gig for long term planning. I realistically am not going to see the big benefit until I close my company and take the cash.

But this isn't true - having money sat in the bank is a whole world better than not having it. You could take six months off work and continue to draw the same money, you could bolster your pension or as has been said, you could take the hit on the >40% tax bracket and simply start taking more out.

I'm really struggling to understand your Point of View here - if you want to increase your monthly income, simply start taking more from the company and accept the tax.

And in pure numbers alone, many of would struggle to get a permie role that pays anywhere near what contracting does for same work. Obviously there's much more to it (i.e., lack of guaranteed work, no benefits etc) but if you have the skills and can find the work (Which it sounds like you can), it seems to me contracting is always going to win in purely financial terms.

[heyya99]

Unless you have a particularly low rate, are likely not to work the usual max 46 weeks in the year, or could get a very high permie salary, then contracting is going to win.

These are the numbers you should be looking at to decide whether it will be worth it.

Obviously some of those numbers are not guaranteed so it can be difficult to predict.

Contracting seems to be a good gig for long term planning. I realistically am not going to see the big benefit until I close my company and take the cash.

[jmo21]

The reason for my thread is that I've been contracting about 2 years now and I'm trying to reflect on the success of it, whether it's worth doing long term or if I should return to perm.

Unless you have a particularly low rate, are likely not to work the usual max 46 weeks in the year, or could get a very high permie salary, then contracting is going to win.

These are the numbers you should be looking at to decide whether it will be worth it.

Obviously some of those numbers are not guaranteed so it can be difficult to predict.

[eek]

The reason for my thread is that I've been contracting about 2 years now and I'm trying to reflect on the success of it, whether it's worth doing long term or if I should return to perm.

If you don't know the answer to that question return to Perm...