Tax differences between salaried and IR35? Tax differences between salaried and IR35?
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  1. #1

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    Default Tax differences between salaried and IR35?

    Hi everyone, I am about to take my firt step in to contracting and am looking at the ins and outs of the tax stuff.
    I have a limited company and I see seasoned contractors talking about IR35 reforms.
    I have been a perm worker paying a higher rate of tax. I am taking a 1 year contract (paid daily) which falls within IR35, where I will be earning the same yearly total in the contracting role as I do in my permanent role.
    My question is will IR35 and paying employers NI contributions leave me worse off than if I was in the perm role??

    Thanks

  2. #2

    Still gathering requirements...


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    Enter your day rate at Contractor Calculator - Inside IR35 and it'll give a comparison of Inside IR35 and what you'd need to earn the same as a contractor. Coupled with the fact that as a permie you'll have holidays/sick pay/pension/etc I'd say you're not getting a great deal here...

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    Quote Originally Posted by sayinghello View Post
    Hi everyone, I am about to take my firt step in to contracting and am looking at the ins and outs of the tax stuff.
    I have a limited company and I see seasoned contractors talking about IR35 reforms.
    I have been a perm worker paying a higher rate of tax. I am taking a 1 year contract (paid daily) which falls within IR35, where I will be earning the same yearly total in the contracting role as I do in my permanent role.
    My question is will IR35 and paying employers NI contributions leave me worse off than if I was in the perm role??

    Thanks
    Why are you going contracting - that's insane in the current market.

    You haven't actually told us enough to give you a definitive answer but I suspect your new daily rate needs to also include Employers NI and various other bits so knock 16% off before you even begin to compare to your current salary.

    Also as it's a daily rate how did you caculate that it's the same as your current salary - how many days are you estimating that you will work (from which you've already taken a 16% pay cut and it's likely to be worse than that).
    merely at clientco for the entertainment

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    Don't forget when using the calculators and wetting yourself at the uplift to what you are on now. The gig can end there on the spot and you will be earning nothing.

    The second gig is the hardest one to get as well so gonna be burning money while trying to look for that elusive 2nd gig.

    Terrible time to be start on this path
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  5. #5

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    Thanks for the info guys. I'm literally brand new at this and trying to work my way around the tax stuff.
    Im looking for flexibility right now so thats why Im going in to contracting. I'm not fussed about tax breaks in being a contractor (is that the potential benefit and the reason most people do it? Not sure as not done it before). As long as I dont earn less that what I'm on now I'm happy
    Last edited by sayinghello; 4th March 2020 at 15:33.

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    Quote Originally Posted by sayinghello View Post
    Thanks for the info guys. I'm literally brand new at this and trying to work my way around the tax stuff.
    Im looking for flexibility right now so thats why Im going in to contracting. I'm not fussed about tax breaks in being a contractor (is that the potential benefit and the reason most people do it? Not sure as not done it before). As long as I dont earn less that what I'm on now I'm happy
    Did you not read my post - you are likely to receive at least 13% less than you currently do when Employer NI is taken on top of the taxes you already pay.
    merely at clientco for the entertainment

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    Quote Originally Posted by eek View Post
    Did you not read my post - you are likely to receive at least 13% less than you currently do when Employer NI is taken on top of the taxes you already pay.
    Yep, you read that right - two lots of NI - Employees AND Employers...
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  8. #8

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    I see what you mean. So as long as the new job pays circa 16% more than what I'm on now I'm golden?

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    What flexibility are you expecting from contracting exactly?
    'CUK forum personality of 2011 - Winner - Yes really!!!!

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    Quote Originally Posted by sayinghello View Post
    I see what you mean. So as long as the new job pays circa 16% more than what I'm on now I'm golden?
    Not quite - as you could be fired at any minute and possible asked to take a few weeks off at little notice due to the department having a "quiet period".

    Even in the good old days there is no way that we would tell you it was worth going contracting unless you were getting 40%+ more than you got being permanent (and ideally 80%) - going contracting today for the same money as you got in a permanent job is currently completely and utterly insanely stupid.,
    merely at clientco for the entertainment

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