86% Take Home Pay (Totally Legit) 86% Take Home Pay (Totally Legit)
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  1. #1

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    Default 86% Take Home Pay (Totally Legit)

    Caveat: I’m new to contracting so there may be a mistake in here somewhere.

    Here’s the November to November plan:

    1) Answer the call from D Odgey Umbrella co., laugh down the phone and say you can do better than their take home estimate without the need for offshore accounts, loans or discretionary annuity payments.

    2) Tell current employer to stick their perm job but you will take their offer of silence money *ahem* I mean severance. Understand that you will never work for them again but this could be beneficial for future IR35 status. Split as follows:
    a) £30K tax free
    b) Put £10K in pension

    3) Secure contract at a decent rate. I’m a newbie so don’t really know what a decent rate is but assume that it’s double the rate paid for an equivalent perm service.

    4) Start one man/woman limited company with catchy name like Super Big Ltd

    5) Pay yourself a tax free salary of £8632 plus tax free dividends of £2K plus £3868

    6) Flat rate VAT saving for this illustration is £1500

    7) Draw £35500 and deduct at 7.5% tax £2663

    8) Corporation tax based less deductions (accountants fee £1086, salary expenses £9K and further 8K pension contribution from Ltd). £12K

    I’m going to include Pension in take home (I realise it’s deferred tax free income) and deduct expenses:

    30000+10000+14500+1500 +35500+8000 + 9000= £108500

    Less 2663 + 12000 + 1086 = £15349

    Net £93,151 or 86% take home

    Okay, I realise this is a one year offer that depends heavily on step 2 but hypothetically does this look like sensible numbers if I were about to embark on step 4? <insert gagged mouth smilie>

    My local contractor specialist accountants is a company called Gorilla Accounting and I'm looking to have a face to face with them shortly.

  2. #2

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    Manic is good enough for Jehovah!

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    A few challenges

    1. You'll pay CT on the 1500 "VAT saving". Don't forget VAT at flat rate %age is based on the total invoice value including 20% Vat rate.

    2. Is the role inside IR35?

    3. Are you sure the role isn't inside IR35?

  3. #3

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    Manic is good enough for Jehovah!

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    Plus actually it's not really 86% because you've left a load in the company and it needs to come out eventually.

  4. #4

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    Amanensia is a permanent contractor


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    Am I reading this right - you're including the £30k redundancy and £10k initial pension contribution in your "take home income"? That's sod all to do with your contracting company...

  5. #5

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    Quote Originally Posted by Manic View Post
    Plus actually it's not really 86% because you've left a load in the company and it needs to come out eventually.
    Indeed. Plus pension.

  6. #6

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    CryingSheep 's job has never been outsourced

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    "The boy who cried Sheep"

  7. #7

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    moneybags doesn't make much sense


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    Thanks for the replies.

    Okay, technically you are right about the £30K, tax on VAT and pension (10K of which would not offset corporation tax) but this would be the personal tax return of the hypothetical person. Pension is deferred income but I know it's cheating. I wouldn't for one minute claim to be a salesman.

    Agent insists the contract is outside IR35 and client says so too although that's not official so I would get an IR35 contract review done.

    Manic, your avatar gif is very non PC in this day and age of mental health awareness. However, I do like kittens.
    Last edited by moneybags; 14th November 2019 at 13:36.

  8. #8

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    Lance - scorchio!

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    Taking £30k severance tax free if you're not formally being made redundant is fraudulent tax evasion.
    For both you and your employer.

    You're either being made redundant or you're not.
    See You Next Tuesday

  9. #9

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    moneybags doesn't make much sense


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    Lance,

    Rest assured the settlement agreement was pored over by employment solicitors. Left by "mutual consent" can mean whatever you like...

    Correction: that's "mutual termination".

    And for clarification the £30K and £10K pension would be processed as PAYE without tax.
    Last edited by moneybags; 14th November 2019 at 13:35.

  10. #10

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    Manic is good enough for Jehovah!

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    Quote Originally Posted by moneybags View Post
    snip

    Manic, your avatar gif is very non PC in this day and age of mental health awareness. However, I do like kittens.
    Yeah you're probably right.

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