Reply to: Take home calculators

[JRCT]

I use a spreadsheet to do a quick calculator to net off every payment my Ltd gets so I know how much of that I need to set aside for VAT and Corporation Tax. I then have an amount that I 'could' spend as mine if I really wanted to.

I don't take expenses into account at that point, other than regular payments such as insurance, accountant etc.

Never, do I need to take that full amount.

On the same spreadsheet I then factor in a monthly amount that I need to cover essentials (mortgage, bills etc) and a weekly amount for beer money, which at my age is not a great deal.

The rest just builds up in the company account.

This helps in 2 ways.

1. It helps me see what the minimum spend I need, personally (without altering my current lifestyle).

2. It shows me how mental I can go on the spending, if I choose to have a splurge one week or if my car exploded or something, without causing an issue with the tax man.

I don't necessarily factor in bench time, but I don't think that's an issue for me personally. I do, however, know that for every full week I work, I can potentially cover a month on the bench (I found this a great comfort in my last contract which I hated. This stopped me walking out of the door, mid-contract, on more than one occasion).

[Barley]

It took me 2 years of contracting to get into the swing of sourcing future contracts to minimise gaps. Made the mistake of spending the extra income like it would never end. In my 2nd year I had two 10-12 week bench periods which ran my finances uncomfortably low.

[Barley]

I tend to average about 230 days a year, and im extreme in avoiding taking odd days off, probably a couple of long weekends/week each year, a long 2 week holiday every other year. Been chasing the never ending goal of financial independence/early retirement.

Bench time between contracts is what clobbers your average days a year, if your turning over contracts every 6-9 months and a 3 week gap between each then thats another 20 days a year+ your losing.

Id err on the safe side and base calculations on 200 working days a year. Look at any extra as a bonus.

If youre starting out contracting, aim to build at least a 6 month buffer (ideally 12 months), not just covering basic living expenses but average monthly expenditure including leisure. Should you find yourself on the bench you want to have the money to enjoy it.

[TheFaQQer]

For those that have posted do those calculators reflect your circumstances?

Not close.

I don't see the point of taking money I don't need out of the company which would incur a tax hit. I'll take it out when I need it, or when I close down and claim ER.

[PurpleGorilla]

How much cash reserves do you currently have?

If you are starting with nothing, then you know what you need to do.

I am in my first year, cream off most of the cash but leave 3 months worth of essentials covered as an absolute minimum. If I need to stop paying a wage I can/will. Which would cover the basic out goings for much longer; maybe a year?

I figure the dividend money is better in an ISA than the business account. So keep my war chest outside the business.

In terms of these calculators, it is all very difficult to determine, but of you use the inside IR35 calcs you can be pretty confident you will get more than this a month.

Best of luck with it all, PG

[SueEllen]

For those that have posted do those calculators reflect your circumstances?

Nope.

Minimise your spending so when life events happen which could be anything from a close family member being sick to being simply f***** off with life you can take time off without worrying.

[malvolio]

For those that have posted do those calculators reflect your circumstances?

Nope, not even close. But then, rather than try and take everything out of the company, I run it as a long term business.

[VillageContractor]

For those that have posted do those calculators reflect your circumstances?

[PerfectStorm]

The second part of this is working out what you actually took home! IF you're pulling out maximum dividends per month, then a sum of dividends+expenses+salary will get you some of the way there, but then you also have to remove from that personal tax paid at the end of the year and things like student loans.

[Waldorf]

The one at Nixon Williams allows you to select your own criteria, so it is more transparent than others I have seen. You can also print the breakdown so nothing is hidden.

https://www.nixonwilliams.com/net_pay_calculator.asp

[Old Greg]

Most of the contracts in my industry and role are 6 months which get extended at least once. So I don't plan on much bench time, although I know it may not work out like that.

I plan on taking very little if any holiday for the first year to help build up my war chest.

That is a good strategy, as long as you are not reliant on that strategy.

[VillageContractor]

Most of the contracts in my industry and role are 6 months which get extended at least once. So I don't plan on much bench time, although I know it may not work out like that.

I plan on taking very little if any holiday for the first year to help build up my war chest.

[TheFaQQer]

Thanks Mal - I've ignored the expenses bit but I've calculated for 240 days a year. Good to know what others use.

I've not counted the days billed since my trading year 2011-12 (and the past few have been good), but before that my longest year was 204 billable days.

[MarillionFan]

210 days is reasonable. I reckon on 220 days, but it's less if you take shorter contracts and dependes of course on how much holiday you take and how much you allow for sickness.

240 days = 48 weeks per years, so assumes you take off bank holidays, a couple of days sick, two week holidays and no bench time.

Best to do a range. Best case, worst case, likely. 240 is the max.

[Old Greg]

Thanks Mal - I've ignored the expenses bit but I've calculated for 240 days a year. Good to know what others use.

Steve the money isn't the concern, it's more that I don't want any nasty surprises.

210 days is reasonable. I reckon on 220 days, but it's less if you take shorter contracts and dependes of course on how much holiday you take and how much you allow for sickness.

240 days = 48 weeks per years, so assumes you take off bank holidays, a couple of days sick, two week holidays and no bench time.