Reply to: Contract Rate calculator (Take home)

[Bluenose]

Uh, I think you mean corporation tax and you are clearly confused about how this works because the calculators do subtract CT in order to calculate company profits which are then available to distribute as dividends...

Yes, apologies, wrong terminology.

Best example of my point though is the SJD calculator.

It gives you the take home amount but a rookie could (would?) assume that that whole figure is there to spend, it is not, HMRC need to take their slice as personal tax on the dividends to get that figure into your personal bank account.

There should be an option (apologies if this has been implemented) of providing the true estimate once personal tax has been removed.

[malvolio]

Some of regular posters from the accountancy companies would be better placed than I to answer this but I though that CGT applies to the individual when you do a your yearly tax declaration.

A calculator wouldn't be able to tell you this because it depends when you take your money out of the ltd and the limits you have used in that financial year (o summat).

Better still wait from a proper expert to pronounce on this.

I think that might be wise.

Meanwhile, the guides beckon... Do not resist the call

HTH

[Antman]

Some of regular posters from the accountancy companies would be better placed than I to answer this but I though that CGT applies to the individual when you do a your yearly tax declaration.

A calculator wouldn't be able to tell you this because it depends when you take your money out of the ltd and the limits you have used in that financial year (o summat).

Better still wait from a proper expert to pronounce on this.

[Wanderer]

One of the pitfalls with the calculators is they do not subtract capital gains tax which, of course is due if you are limited and take out divi's, most calculators assume that you are and do not subtract the capital gains tax due which comes out of your take home.

Uh, I think you mean corporation tax and you are clearly confused about how this works because the calculators do subtract CT in order to calculate company profits which are then available to distribute as dividends...

[Bluenose]

One of the pitfalls with the calculators is they do not subtract capital gains tax which, of course is due if you are limited and take out divi's, most calculators assume that you are and do not subtract the capital gains tax due which comes out of your take home.

So, you can take it home but you will have to give HMRC quite a bit

[SueEllen]

But you get my point anyways...

The reason you were told you work for one is that you need to get it firmly ingrained into your head that your money and the company's money are two different things otherwise you can end up in a mess that even your accountant won't be able to help you with.

And don't be attempted to operate without an accountant.

[Wanderer]

So basically, do you have any calc to suggest to me?

The take home is dependant on your IR35 status.

Earning £200/day and presuming £25/day accounted for as expenses, you would get ~70% of the contract value if IR35 caught and ~85% if you are outside IR35.

Nixon Williams have one of the better calculators in my opinion. Plug your numbers in and see what you get out.

[evilagent]

Dont you just take your gross:

substract the whole tax allowance amount (which will be different if your single, married etc)

Then, for every £1,000 you gross, you subtract Corp-Tax, and put aside.
(eg, if Corp-Tax is 24%, you bank £760 for every £1,000 div you take)


from the gross you can deduct your running costs, etc.
variables:
Complications are if you pay yourself above tax threshold, and pay nominal amounts of PAYE.
Expenses.
An amount for accountants, etc.

[rurffy]

If you have no expenses, use the rule of thumb figure of 70%.

This means take-home / income = 70%.

If you have expenses, that will mean that (take-home + expenses) / income > 70%
but take-home / income < 70%.

So it depends which figure you are looking for, take-home, or take-home + expenses. Personally I am only interested in take-home.



Example:
1. income 100, taxes etc 30, take-home 70.
result = 70%
2. income 100, expenses 10, taxes etc 27, so take-home 63.
real result = 63%.
total not paid to taxes etc = 73%, but you don't get to spend 10 of that on yourself because you did pay it in expenses.


PS:
3. income 100, expenses 0 but you claim expenses 10, taxes etc 27....
result: 4 years for fraud.

hmm Detailed explanation . Thanks for that ..

[Ignis Fatuus]

Thanks for the reply ,

So basically, do you have any calc to suggest to me?

If i say 70% right ? My expenses will obviously increase this number right?

Thanks..

If you have no expenses, use the rule of thumb figure of 70%.

This means take-home / income = 70%.

If you have expenses, that will mean that (take-home + expenses) / income > 70%
but take-home / income < 70%.

So it depends which figure you are looking for, take-home, or take-home + expenses. Personally I am only interested in take-home.



Example:
1. income 100, taxes etc 30, take-home 70.
result = 70%
2. income 100, expenses 10, taxes etc 27, so take-home 63.
real result = 63%.
total not paid to taxes etc = 73%, but you don't get to spend 10 of that on yourself because you did pay it in expenses.


PS:
3. income 100, expenses 0 but you claim expenses 10, taxes etc 27....
result: 4 years for fraud.

[LisaContractorUmbrella]

Thanks for the reply ,

So basically, do you have any calc to suggest to me?

If i say 70% right ? My expenses will obviously increase this number right?

Thanks..

Will your working practises put you inside or outside of IR35? What is your tax code? Are you working 5 days per week, 48 weeks per year? What costs do you incur that are wholly and exclusively as a result of the contract?

You would need to answer all these questions, and possibly others, in order to be able to get an accurate calculation

[northernladuk]

You have tried googling this haven't you? Might come up with a site called contractorcalculator somewhere in the returned list......

[rurffy]

No you aren't. You may work for one, but you aren't one.

But you get my point anyways...

[TheFaQQer]

I am a limited company with VAT registered

No you aren't. You may work for one, but you aren't one.

[Antman]

Expenses and take home are different concepts. The only effect of expenses on your take home is that it reduces your exposure to corp. tax.

It's worth mentioning that only stuff wholly used as part of doing your doings can be claimed as an expense.