Re: Sorry, being a yank, I'm missing something...
"And the rest. You have to pay 11-14% in employer based national insurance contributions. If you are employed at £100k then your take home is about £65k, if you are a contractor, caught by IR35, then your take home is about £56k and you get none of the benefits of employment."
The interesting thing is that its kinda the same in the US.
If you take a person who works for a company, and is paid a $100,000 salary, he gets taxed on his salary.
If you are a consultant and bill @ $50.00 for 2000 hours in a year, you make $100,000. gross.
In terms of taxes, you pay the corporations taxes plus what you would have normally paid. However, you have a lot more deductions that an employee doesn't get. To be fair, you come out ahead as an employee.
However... companies pay a premium to consultants. This premium ends up being greater than the taxes, and benefits of being an employee, not to mention you have the ability to pick and choose your projects.
In the US... its a bit different. Hopefully I can explain it.
You incorporate as an S Corp.
You earn money, and you pay your business expenses which become pre-tax deductions.
(Health Insurance, business expenses... etc...) The rest could be used for salary, or left in the company.
If left in the company, you pay a corporate tax. If you to take it out as salary, you pay taxes on the salary.
If you keep it in the company, you get taxed twice, once as corporate income, once has salary. Note you can take it out as a dividend, and while you escape payroll tax, the dividend is taxed as ordinary income.
In short... you end up with roughly the same result of IR35.
Thx for the input.