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When the subject of IR35 comes into conversation for contractors, one of the first and most important thoughts is how your take-home pay would be impacted if your contract was inside IR35. IR35 calculators became an easy way to find a snapshot figure of your earnings depending on your situation.
If your contract is inside IR35 and you’re looking to calculate your take home pay you may have stumbled upon a calculator. Many of these will ask you to simply enter your daily or hourly rate along with whether your contract is inside or outside IR35. Others, like the HMRC calculator, work out how much you need to pay to HMRC if your contract falls inside IR35.
However, HMRC’s own calculator has come under fire for being inaccurate and not taking important factors into account. This is why we have created this guide. There’s so many calculators out there and we think it’s important that you know even HMRC’s own tool has proved to be unreliable.
The issue with using an online IR35 calculator is that no two contracts are exactly the same, which makes it difficult to get an accurate or consistent figure. Not only that, but calculating your take-home pay if your contract is inside or outside IR35 can be dependent on a number of variables.
This could include your short, medium and long-term business goals and aspirations, never mind your daily rate, approximate expenses, attitude to pensions or likely capital purchases. It’s highly unlikely that an online calculator would be able to predict your pay based on all of the above factors.
Instead of relying on inaccurate, inconsistent or outdated figures, our take-home pay calculator will provide an overview of what you could expect to earn based on a number of different factors, including your day rate.
Our take-home pay calculator is a good way to get a snapshot of your earnings, but for a more detailed understanding of the complexities on how to set up a limited company, start contracting or managing your own company, we recommend that you speak to an accountant.
The cost of being inside IR35 is well known and many contractors believe that they will lose a lot of their freedoms. Whilst this does limit your ability for tax planning and claiming a number of expenses, it’s not the end of the world. If your contract is found to be inside IR35, you will be treated as an employee. This means you will pay the same National Insurance and tax contributions as a regular employee.
Our guide to working inside IR35 can give you a broad idea of what to expect along with the implications of how your take-home pay is affected if you are deemed inside IR35. There’s also information around how the Flat Rate VAT Scheme can benefit you, what expenses you can claim.
If your contract is inside IR35, you should also be aware that your earnings will be subject to deemed payment. This means that all your earnings will be ‘deemed’ as employment income to the contractor and are usually paid at the start of the tax year.
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Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.