Reply to: How much do you work to the tax brackets when inside IR35?

[NotAllThere]

What if the 200k role took more time and/or effort to perform satisfactorily than the £100k role? Still worth it if you were keeping 11.5p of each additional £1 earned over the 100k? Everyone has a line somewhere

Such a scenario never happens. Once you reach a certain level either:
1. It's your skill that matters - not how hard or long you work. If you can do it - great. if you can't you'll be out.
2. It's just a way of keeping score. CEOs on millions a year do not work thousands of times harder than Joe Bloggs on the meat packing line.

[northernladuk]

I'd take the £200k role and then start looking for a £250k role.

Nailed it.

/Thread

[TheDude]

There's plenty of "What if's" on the slippery slope.

If two identical roles appear, one paying £100k for a year, the other paying £200k, some on here seem to advocate taking the £100k role because the % after tax is higher and less tax is paid. Others say take the £200k role because the net after tax is higher.

I'd take the £200k role and then start looking for a £250k role.

[WTFH]

What if the 200k role took more time and/or effort to perform satisfactorily than the £100k role? Still worth it if you were keeping 11.5p of each additional £1 earned over the 100k? Everyone has a line somewhere

There's plenty of "What if's" on the slippery slope.

If two identical roles appear, one paying £100k for a year, the other paying £200k, some on here seem to advocate taking the £100k role because the % after tax is higher and less tax is paid. Others say take the £200k role because the net after tax is higher.

[pr1]

If the tax system were such that with, e.g. £100K I've a marginal rate of 68.5% and at £200k it's 88.5%, I'd definitely go for the £200k roles because in absolute terms it's more money in my pocket. I look at my overall tax rate - not my marginal rate.

What if the 200k role took more time and/or effort to perform satisfactorily than the £100k role? Still worth it if you were keeping 11.5p of each additional £1 earned over the 100k? Everyone has a line somewhere

[eek]

If the tax system were such that with, e.g. £100K I've a marginal rate of 68.5% and at £200k it's 88.5%, I'd definitely go for the £200k roles because in absolute terms it's more money in my pocket. I look at my overall tax rate - not my marginal rate.

Then you would very much be an exception rather than the rule. Most people look at their total income and think - how can I maximise what I get in my pocket - and remember a lot of us work on projects that are 6-18 months long so it's important to maximise that revenue as you don't (necessarily) know when the next contract will appear.

[NotAllThere]

Its no longer 65%, according to my quick calculation it is now 68.5% with this years double whammy NI hike

At what point would you decide it would no longer be worth it? at 78.5%, 88.5%?

Because if people like yourself are ok with paying 68.5% or more, they will just keep increasing it.

If the tax system were such that with, e.g. £100K I've a marginal rate of 68.5% and at £200k it's 88.5%, I'd definitely go for the £200k roles because in absolute terms it's more money in my pocket. I look at my overall tax rate - not my marginal rate.

[youngguy]

Nobody likes paying 45% tax but my philosophy is that more is more and if I am paying extra tax then maybe people in genuine need won't have to wait as long for an operation or to be homed.

if only it went to those in need eh!

Without trying to drag this into the political arena , I'd rather keep it in my pocket and donate to charity as I feel I have at least a little control over where that goes.

[northernladuk]

Its no longer 65%, according to my quick calculation it is now 68.5% with this years double whammy NI hike

At what point would you decide it would no longer be worth it? at 78.5%, 88.5%?

Because if people like yourself are ok with paying 68.5% or more, they will just keep increasing it.

Working the same hours at the same level so why not? To cap your own income just to avoid a tax bracket is just ridiculous.

[Fraidycat]

Definitely. As far as I'm concerned every £1 earned at 65% is 35p in my pocket.

Its no longer 65%, according to my quick calculation it is now 68.5% with this years double whammy NI hike

At what point would you decide it would no longer be worth it? at 78.5%, 88.5%?

Because if people like yourself are ok with paying 68.5% or more, they will just keep increasing it.

[NotAllThere]

...
Currently outside IR35 so not an issue for me.

Definitely. As far as I'm concerned every £1 earned at 65% is 35p in my pocket. Enough £1 and it amounts to a worthwhile amount. I'm more interested in absolute values than percentages. I don't buy things with percentages.

[northernladuk]

totally fair point. I guess there might be an argument to cull a few days if you just slip over that figure, or if you are happy in a gig you may not move to a new one for an extra £50 a day inside , but extra income is indeed extra income!

Ah yes absolutely. I kind of thought you were looking at it from a side by side comparison with that being the only aspect to consider. Being in one the gigs already makes a massive difference you are right.

Yeah that's right but over £100k your personal allowance (12570) tapers off and hits zero at 125k so that has an additional tax impact. Then the 45% kicks in over 150k.

As many of us used to (and likely you still do) stay under the 40% tax bracket, losing the personal allowance and hitting the 45% is not a consideration many of us have possibly had to think about before. Be glad you don't know about it

Right gotcha and amen to that last bit.

[TheDude]

Nobody likes paying 45% tax but my philosophy is that more is more and if I am paying extra tax then maybe people in genuine need won't have to wait as long for an operation or to be homed.

[eek]

I think this is covered here in a post by Lucy but it's 5 years old.



Full thread here
https://forums.contractoruk.com/umbr...april-6th.html

And because you are the customer of the umbrella it's possible the umbrella may be happy to delay both points (heck it's a selling point for the smaller ones as there is little else to compete on).

when a payment of earnings is actually made or when a payment on account of earnings is made (see EIM42270)
the time when a person becomes entitled to payment of earnings or a payment on account of earnings (see EIM42290)

be asking for the next payment to be done on April 6th hence delaying the entitlement part. The thing to remember here is that can be done elsewhere - it is common for bonuses to be announced and for people to choice when they wish to receive them (in say March or April).

Note this is the exact opposite of what Ian was after on Monday (before he deleted everything). There he was trying to force early payment (which wasn't possible because he wasn't entitled to payment). When I finally looked at his reference it covers the rather niche area mainly related to back payment of equal pay...

[youngguy]

You aren't really talking tosh as it's always interesting to know but I definitely think you are looking at it all wrong. Picking gigs to stay under a threshold seems odd. I'd just pick the highest, use any advtanges there is and just be happy. You might be paying extra tax on it but it's still money in your pocket.

totally fair point. I guess there might be an argument to cull a few days if you just slip over that figure, or if you are happy in a gig you may not move to a new one for an extra £50 a day inside , but extra income is indeed extra income!

You mention staying under 100k and avoid the 45% rate but you are nowhere near it. It's 40% between 50,271 – £150,000 and 45% on £150,000 upwards isn't it? I'm outside so not a clue but just checking.

Yeah that's right but over £100k your personal allowance (12570) tapers off and hits zero at 125k so that has an additional tax impact. Then the 45% kicks in over 150k.

As many of us used to (and likely you still do) stay under the 40% tax bracket, losing the personal allowance and hitting the 45% is not a consideration many of us have possibly had to think about before. Be glad you don't know about it