John Forbes of Forbes Chartered Accountants Great Dunmow, was talking to a contractor today – we set up a meeting as he isn’t happy with the umbrella company he is working through. He pointed me to another Accountants web site where it warns about take home pay calculators and they say – logically, your take home must be 80% if you draw dividends and Corporation tax is 80%. HELLOOOOO Did no one ever hear of IR35 (we can work with you on this!) Assuming that’s not an issue (bit of a big assumption, we would rather check before quoting tax rates) then, what if you make a good living?

After a salary of £7,068 per annum, and using up basic rate tax bands I calculate Profit 100 Corp tax 20 Dividends 80 Higher rate of tax on dividends effective rate of 25% = 20 You are left with 60 Start 100 left with 60 means a 40% tax rate on higher rate income (after 20% on basic rate). Funny that, it’s the income tax rates If you make lots then a higher higher rate kicks in over £150k… So is the saving just in National insurance – well, yes!

Assuming a spouse is not a profit contributor … but that’s another matter. Scary for contractors looking to understand things if they go to the web site I mentioned above! Made me wonder whether we should focus on Contractors Accountants. Just another thought from John Forbes of Forbes Chartered Accountants, Great Dunmow Essex. “Maybe that’s why we are different! John. www.forbesca.co.uk Twitter @EssexAccountant Facebook: Forbes Accountants