Net Pay Calculator – Discover how you can retain a minimum of 85% net contract value

The Net Pay Calculator alternatively known as the 'take home pay calculator' is a tool used by most IT Contractors in the UK, who are concerned about getting the best value for their contractor tax arrangement. An excellent example of this can be found at contractor tax solutions Net Pay Calculator.


Other major concerns are IR35 Rules and whether a contract is inside or outside IR35 How can you can ensure you have the best contractor tax arrangement? By using a good Net pay calculator that explains all the benefits of the various forms of contract and ownership eg, Umbrella companies vs limited companies etc.



Net Pay Calculator

Since December 9 2010 the HMRC has made IR35 Contractor tax legislation ever more stringent, To calculate net pay on a take home pay calculator has become fraught with danger that is if you use some other service than an expert in Contractor Tax Solutions.

This guide was created to make your life easier and give you the best information to help you make a choice that will save you a lot of hassle and heartache.

IR35 Rules
Ensuring you are outside of the IR35 Rules is the best way to start guaranteeing your contractor tax can be optimised in the most efficient way, to check this out take a look at a good take home pay calculator.

TIPS ON IR35 Rules

The nature of your contract and the nature of your work arrangement determine your IR35 status.

I will have to write a more detailed article on this later but suffice it to say, if you are performing the same work in the same way and using the same tools (owned by the client) as a regular employee, you would most probably be deemed inside IR35.

To make certain that you are outside of IR35 you can use a good net pay calculator as these companies typically provide free IR35 assessment as well as draft contracts to maximise your contractor tax benefits, and make sure that they have a service such as doing your annual tax returns for you.

VAT IMPLICATIONS

Who should register for Vat? Well typically, if youre earning less than 64000 british pounds then vat is not an issue, however if you are one of the lucky few, you should definitely register for vat. This is to ensure that you can claim and collect Value added tax. As It can be a real hassle and adds a lot of complexity to your tax returns and annual self assessments, I would suggest looking for a hassle free approach such as a umbrella company that operates an IR35 insurance, I would suggest consult with a contractor tax solutions expert to get definitive tax advice

National Insurance
Your NI(National Insurance) contributions will need to be paid directly by yourself if you are running a limited or personal service company.Depending on your earnings you could end up paying class 2 NI contributions, for example if you had exceedingly low earnings.

Setting up a direct debit with the HMRC can be a blessing in taking care of this small but important issue.

If you are earning a decent rate you may end up paying a very high rate of both NI and Tax, this can be a crippling experience for high earning IT contractors, and many choose to investigate many of the net pay calculator's on the market, I would urge you to consult a contractor tax solutions expert as well to ensure your IR35 rules and contractor tax advice is in order.
The biggest contractor tax hassle that UK contractors face is the annual self assessment tax return. This is a major hassle as you are required to keep a record of all expenses associated with your work and all your earnings and work out how to put them in the HMRC form.

This is what the HMRC uses to work out how much tax they can claim off you, and its based on the previous financial years earnings.

Time Management
One last thing to consider is how you want to manage all this time? do you want to spend time doing assessments, going through records, worrying about IR35 and contracts or would you consider all the other alternatives? If you would prefer a less hassle orientated solution I think you should check out a good Net Pay Calculator comparison from a contractor tax solutions provider.