SJD Calculator

[floatsy]

Hi - I understand that SJD and Nixon Williams etc are held in high regard on this forum, and thus don't doubt their professionalism and service.

That said, I have a genuine query then on the SJD calculator.

http://www.sjdaccountancy.com/contra...tor/index.html

Using this, it gave me a take home rate of 75% for my take home component.

However, my understanding - after more investigation is the difference between LTD and UMBRELLA is actually just about 10%.

This is on the advice of another accountancy firm here (which said take home pay is just at 65% for LTD) - so my question is - where is the discrepancy occurring?

Is the SJD calculator actually reflective?

Thanks for any experiences/perspectives shared.

float

[Spacecadet]

i don't think the SJD calculator takes into account the tax due on dividends over the income threshold.

[simondolan]

The calculator is a guide - nothing else.

It represents a reasonable take home pay based on a little bit of simple tax planning. Everyone has different expenses, incomes, drawdown requirements and so on.

75% is actually quite a conservative figure - we can easily show 83% best case scenario.

65% is way too low - the "accountants" that told you this wouldn't be just offering umbrella services would they now??

Hi - I understand that SJD and Nixon Williams etc are held in high regard on this forum, and thus don't doubt their professionalism and service.

That said, I have a genuine query then on the SJD calculator.

http://www.sjdaccountancy.com/contra...tor/index.html

Using this, it gave me a take home rate of 75% for my take home component.

However, my understanding - after more investigation is the difference between LTD and UMBRELLA is actually just about 10%.

This is on the advice of another accountancy firm here (which said take home pay is just at 65% for LTD) - so my question is - where is the discrepancy occurring?

Is the SJD calculator actually reflective?

Thanks for any experiences/perspectives shared.

float

[simondolan]

It does.

i don't think the SJD calculator takes into account the tax due on dividends over the income threshold.

[floatsy]

65% is way too low - the "accountants" that told you this wouldn't be just offering umbrella services would they now??

No they are the other major accountancy here.

[floatsy]

Simon - It's good to have you here.

Using your calculator, and an assumption that take home pay could be 75% - against an umbrella take home of 55% or so - is clearly very significant.

So just as you have suggested it could be 85% could it also go down to 60%?

It seems that the calculator then is just a very high level range. Which is fine.

Just that as I am reviewing decisions based against it, the context is good to have.

Thanks,
float

[Nixon Williams]

The percentage that you can expect to retain depends upon many factors, each case will be different.

When we are asked to "quote" some of the questions we would consider (apart from simply what rate you are on) would include:

a. whether IR35 applied to the contract
b. what travel costs you might incur
c. what salary is taken
d. whether Flat Rate VAT is applicable

Our net amount would give the amount after all taxes, both company and personal taxes.

It is vital that if you intend to compare that you compare like with like, the tax rules are the same for everyone!

Some schemes quotes are based on the contractor only taking upto the higher rate threshold and then applying for a concession from HMRC to close the company. This is not guaranteed.

Alan

[floatsy]

Thanks, Alan, that makes sense, and that is my real point - it's important to know the context when making decisions otherwise I'm flying blinder than I need to. So I just sought clarification on this. Thanks.

[simondolan]

Yes - the savings of using a Ltd over an Umbrella are indeed very significant - 20% would be right assuming you fall outside IR35.

No way the return from a Ltd would go down to 60% (assuming outside IR35) unless you paid all of the income out as salary.

Simon - It's good to have you here.

Using your calculator, and an assumption that take home pay could be 75% - against an umbrella take home of 55% or so - is clearly very significant.

So just as you have suggested it could be 85% could it also go down to 60%?

It seems that the calculator then is just a very high level range. Which is fine.

Just that as I am reviewing decisions based against it, the context is good to have.

Thanks,
float

[floatsy]

I found an old thread - so this provides the context I was looking for:

Simon

You say that "Your take home pay using your own Limited Company is usually in excess of 80%"

I think it's important to note that this is only for low paid contractors who do not fall into the 40% bracket (or not by much). For contractors earning more I would believe that the take home pay is more like 65% because they then pay dividend tax at higher rate of 40%.

So someone on contract value of £50k will get a return of ~ 80%
Someone on contract value of £100k will get a return of 65% - 70%

Having said that, it's still better than PAYE.

Please enlighten me if I am missing something obvious here.


Thanks.