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There are alot of people on here complaining about contractors not paying the same tax as permenant workers...

So I thought I'd give a bit of a rough break down to highlight how little difference there is between permenant and contract staff...

I know this wont be the same for everyone, its an approximation based on my experiences, Im ignoring VAT for simplicity.

So lets start with a basic rate of £7k a month (Its a round number)

Out of that I pay 20% Corporation tax. (£1400)

Leaving the company with £5600

Then theres the expenses (that that the business incurrs without me doing any travel or even being in a contract)

Accountant £110

Insurances £50

SW Licences/Services £100

So thats £260 off leaving 5340 in the company

Now for expenses that benefit me:

£400 pension (about the same as Id get as a permie with a personal and employers contribution)

£800 Salary (Tax Efficient)

So that leaves £4140 in the company and £800 in my personal account.

Now, I might get told at the end of the day that Im not needed next week because funding for the project has been pulled so I save 30% a month in the business for that

Save : £1242

Leaving me with £2898 in the company to take as a dividend.

So I can take £2898 dividend added to the £800 salary brings my take home to : £3698

A quick look up on the salary calculator required salary shows that I have the same take home as a permie on 44.5k... Thats almost the salary I was on as a permie when I started contracting....

Of course the main benefit from the above is that if I can stay in continuous contracts for a decent time that I build up a decent bit of "Backup money" which permies cant do (well their employer gets the benefit) but considering the sacrafices in employment benefits I think this is a fair trade off - at the end of the day there is nothing stopping permies doing the same.

So please bear in mind when you start contractor bashing that the day rate is a lot like your annual salary - sounds like a lot but we don't actually get to take it all home with us!