Take Home Pay Examples
Take home pay case studies - Umbrella and Limited Company
For more details about 'How much can you earn as a contractor' visit our NEW page.
Umbrella option
Steve - opted for using an umbrella company that charged him a monthly fee of 5% of his earnings (fee's can be as high as 10% of the invoiced contract amount).
Steve's decision to use an umbrella company was based on:
1. it was his first contract;
2. he wasn't sure if he'd be contracting for long;
3. he was a little worried about the paperwork involved in running his own ltd company.
After his first year of contracting Steve reviewed his finances:
| Contract Value Invoiced | £65,000 |
| Expenses | £6,000 |
| Umbrella Fee | -£3,250 |
| Income tax and Employers/Employee NI: | -£20,492 |
| Total Deductions: | -£23,742 |
| Take home pay: | £41,258 |
Limited Company Option
Julie - had previously worked through an umbrella company and decided that it was time to go limited, a number of her friends had already made the move; Julie used SJD Accountancy whose fees are £95 per month plus VAT.
After one year of working through her limited company, Julie reviewed she finances:
| Contract Value Invoiced | £65,000 |
| Expenses | £8,000 |
Julie's claimable expenses are a little higher than Steve's as they include her accountancy fees along with other expenses she can now claim as she's working through her own limited company. Click here to read SJD's Guide to Expenses.
| Accountants fee: | -£1,340 |
| Income tax, Employers/Employee NI and corporation tax: | -£15,094 |
| Professional Liability Insurance | -£350 |
| Total Deductions: | -£16,784 |
| VAT Flat rate scheme savings | £1,446 |
| Interest from bank account | £360 |
| Take home pay: | £50,022 |
Both Steve and Julie are outside IR35, if Julie had been inside IR35 her take home pay would have been £46,076
Obviously, Julie had more paperwork to administer, however she feels the extra effort was worth the increase in her take home pay and control over her finances.
Working through your own limited company isn't right for everybody, especially those who are only planning to contract for a short period or those with low contract values. Also, as mentioned, there is some administration that you must personally take care of.
However, the administrative side doesn't take that long, and once you get into the swing of things it does become easier. Many people find working through their own limited company is extremely rewarding and would never go back. A testament to this is we very rarely hear of clients throwing the towel in and going back to using an umbrella company.
To see what's involved in working through a limited company verses an umbrella company click here and visit our limited or Umbrella page.
For an illustration of what you could be taking home visit our Limited company business calculator which includes full tax planning provisions.
For details of SJD's award winning umbrella company ContractorUmbrella click here .
If you have any question about contracting or would like further advice please either contact your SJD Accountant or call our new client services helpdesk on 0500 152 500 / 01442 232700 or e-mail michelle.turbutt@sjdaccountancy.com.
About SJD Accountancy
SJD Accountancy have been acting for Contractors and small businesses (SME's) since 1992; are the most recommended accountancy firm on the Internet and have more qualified staff than any other specialist firm with qualifications covering the following major Tax and Accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA.
Key features
- The UK's largest specialist provider of Fixed Fee, Limited Company accountancy services to the Contractor/Freelancer market
- The chosen accountancy firm to over 8,500 Contractors and Freelancers
- Advisers to the Professional Contractors Group
- Alliance partner to www.contractoruk.com
- More qualified staff than any other specialist firm - ATII, ATT, ACCA, CA, ACA, FCCA, ACME
- Office facilities in all major cities of the UK
- Money back service guarantee
- Recommended by the Sunday Times
- Winners of the Accountancy Age Awards for Excellence, Finalist 2006, 2005 and 2003
SJD Accountancy offers a complete package including completion of accounts, payroll bureau, dividends, corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns for a fixed monthly fee of £95 plus VAT.
In a survey of our clients, 98% rated us as 'better than other accountants'; we are working hard to convince the other 2%.
