Managing expenses efficiently

[youngguy]

I'm doing some forward planning and thinking about possible scenarios should I be offered a contract extension next year, taking me over 2 yrs.

Obviously I wouldn't be able to claim T&S etc. One option would be to absorb this, but another would be to propose a rate increase.

Currently expenses are static (£500pcm), which is an easy enough calculation, however I'd also likely have to draw more dividends to cover these expenses personally, which would take me into the higher tax bracket.

So I'm wondering, how do folk here model this so as to not 'be out of pocket'?

To try and answer the immediate Qs, yes I did search but probably not hard enough, I could ask my accountant but I'm interested in how ppl here approach this, no I haven't had an offer so the 2 yrs is not up, yes I know the client might not accept my rate but that's not my Q. Yes I am sure contracting is for me!

And yes...I expect and await certain folk here to find a point I have missed and present it back to me(without answering the questions) [emoji6]

[northernladuk]

How much extra are we talking here? Staying away in hotels all week or just petrol an food?

[youngguy]

How much extra are we talking here? Staying away in hotels all week or just petrol an food?

£500ish pcm. Pretty static as just travel and a bit of food.

[northernladuk]

£500ish pcm. Pretty static as just travel and a bit of food.

Ah apologies didn't see that. As I see it your options are..

Ask your agent for a rate rise. Just 20 quid a day should put you on an even keel. If he's on a fixed percentage he's gonna have to ask the client for it which is unlikely.

Swallow it. Its not enough to throw a 10k a month gig away for.

Find a new gig. Can't plan on stay anywhere long term as a contractor so maybe now is as good a time as any to go.

[youngguy]

Ah apologies didn't see that. As I see it your options are..

Ask your agent for a rate rise. Just 20 quid a day should put you on an even keel. If he's on a fixed percentage he's gonna have to ask the client for it which is unlikely.

Swallow it. Its not enough to throw a 10k a month gig away for.

Find a new gig. Can't plan on stay anywhere long term as a contractor so maybe now is as good a time as any to go.

What I'm wondering is how jumping a tax bracket changes things (I've always been basic rate).

So let's say I currently take home up to the higher limit (£46,350) and then started incurring costs of £6k for T &S personally.

If I simply added on £27.27 a day (27.277*220=£6k) that doesn't cover me, as my personal take home would now be £6K into the 40% bracket and it would mean more dividend tax as I'd have drawn a higher divvy. So that £6k comes down to 3-4 after deductions. Therefore maybe it would be (eg) £35 a day increase.

Does that make sense, or am I talking tosh?!

[northernladuk]

Every time someone quotes numbers on here it ends in a long chain of corrections. Let your accountant spell it out for you.

This thread is about the 24 month rule not tax brackets.

[youngguy]

Every time someone quotes numbers on here it ends in a long chain of corrections. Let your accountant spell it out for you.

This thread is about the 24 month rule not tax brackets.

My Q is about how ppl model for the impact of the 24month rule and take various factors into account.

I merely used the figures to convey my original Q as my impression was you misunderstood when you suggested £20 (which wouldn't have covered £6k anyway!).

I appreciate your view and you taking time to respond, feel free to bow out if you don't want to get drawn into corrections.[emoji106]

[northernladuk]

My Q is about how ppl model for the impact of the 24month rule and take various factors into account.

Which isn't the topic of this thread. Feel free to start a new one though as I can't remember a thread discussing the financial impact of going over the rule. As always though, your accountant would be a good call.

[youngguy]

.... the financial impact of going over the rule.

that sums it up nicely actually - similar to an ir35 inside/outside calculator.

...As always though, your accountant would be a good call.

I don't disagree but I don't fully agree! For me, it's always good to get wide views and be semi-informed so I can ask better questions. I have misplaced it but didn't wanna share it yet as there are better and brighter folk here and I fear for my fragile ego [emoji13]

[malvolio]

Which isn't the topic of this thread. Feel free to start a new one though as I can't remember a thread discussing the financial impact of going over the rule. As always though, your accountant would be a good call.

The financial impact is an additional 19% of taxes payable on your claimed expenses. So £500 a month will now cost you around £600. Whether or not that then means you have to take out money over the HRT level to pay that depends on lots of things. And if it does upping your rate won't help, since you still have to take the money out.

The only way to get around it is (a) pay all expenses from YourCo - i.e. not personally and reclaiming it - and (b) get the client to cover the uplift. Good luck with that.