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Tax rates and take home percentages at differing income levels

Take home income and tax liabilities, corporate and personal, worked out at differing income levels, with inside / outside IR35 scenarios and spouse allowances/no spouse allowances scenarios.  NB this refers to Private Sector IR35 for 2019-20 and earlier – we don’t currently have modelling for 2017/18 onward reverse IR35 for Public Sector Contracts, and their proposed extension to Private Sector Contracts from 2020/21.

To see the break down of the figures in more detail at an example income / business turnover level of £50k, £100k and £200k, visit this page – example of tax liability for a contractor/PSC

For access to the calculator to run your own model, visit this page – tax Calculator

Assumptions:

  • All income is drawn from the company – additional savings may exist if money is left un drawn, but that raises questions around inability to spend and ultimate extraction policy
  • Income is exclusive of Vat – Vat registration may generate some additional savings through either a profit on the Flat Rate Scheme or recoverable Input Tax see Tax: VAT basics
  • For the example with spouse allowances, spouse has no other income and dividends are split 50:50
  • Outside of IR35, salaries of £12k pa assumed for director, £8,040 spouse
  • Employment Allowance not factored into these figures. Possible reduction in Employers NI
  • The model supports English/Welsh tax rates only

Cautions:

A word of caution: we’ve come across instances of potential clients either asking various accountants for a “quote” on their take home pay, or using different online calculators. Be aware that the tax rules are the same for all – different answers will be due to:

  • differing levels of sophistication in calculators
  • differing underlying assumptions, eg re expenses or salary levels
  • calculator errors (they are not as easy to write as may be thought – whereas the software used for submitting returns is tested to HMRC datasets for quality, calculators and modelling tools tend to be more free design)

However variations will not be due to different tax rules applying to different accountants – the days of accountants (mainly composite providers) claiming advantage through “agreed” (or not) dispensations with HMRC are long gone.