My simplistic way to determine inside IR35 rate.

[Hobosapien]

High expenses (such as working away from home during the week) while outside IR35 eats into any profit, so in some cases being inside IR35 with a suitable rate increase (e.g. 30%+) and also getting the client to swallow some of the expenses (e.g. accommodation) may even be slightly better than being outside IR35 and having to cover all expenses out of income.

I keep telling myself that anyway.

[pscont]

Oh.. right. Thanks for that. How have your clients reacted to you asking for £780 a day so far?

It is either this or they need to find someone else. Still waiting.

[b0redom]

Last Client Co insisted I went through this exercise with them, despite the fact that I told them it wasn't worth doing. When I told them it would be approximately double they were disinclined to discuss it further....

[northernladuk]

It will of course, that's why it is simplistic.

Oh.. right. Thanks for that. How have your clients reacted to you asking for £780 a day so far?

[pscont]

It will of course, that's why it is simplistic.

[TheFaQQer]

As I've stated previously, here's my approach:

1) Work out the take home you want / need / currently have after expenses
2) Add your expenses onto that amount
3) That becomes your new take home
4) Plug that amount into an income tax calculator and see what the gross weekly / monthly figure should be to meet that take home
5) If you are expecting to pay the apprentice levy from your rate, add 0.5% on to that

For example, if you want to take home £4000 a month plus £1000 a month expenses, you need to be looking for an annual gross rate of £7500 a month - so your £200 has now become £375 a day, which is an increase of 87% (somewhat higher than the 25-30% that some people bandy around).

£550 a day with no expenses minus corporation tax means you're looking for £8800 a month. To match that, you need to be after £15k a month gross, so around £750 - an increase of 36% (again, much higher than some guessed rates of what you need to increase your rate by). If you have an average of £30 expenses then your net income needs to go up by another £600 to £9400, and your gross rate to a shade over £800 per day (45%).

There are different ways to work out what you need to charge to match (or get close to) the outside IR35 rate - the only certainty is that the higher the expenses and the lower the rate, the percentage increase gets much much bigger.

[northernladuk]

Won't it depend on expenses?

[pscont]

In a very simple terms what I do to get the inside IR35 rate for a given day rate is:

From the total gross out of IR35 deduct your expenses to get the profit.
From the profit deduct the 20% corp tax + any dividend tax to get the net take home (X).

Now it is a bit of try and error with any salary calculator to get a net salary value = or ~ X.
Bear in mind that for any figure will need to have 13% ErNIC taken out first, before you compare the salary.

Roughly this resulted in in-IR35 of £780/day for a normal £550/day out-IR35 in my case, but it will vary with you.