Take Home as a contractor

neil_hosey

Sorry if this has been done to death, but I cant find a recent thread on the actual take home of a contractor!!

Im wondering at 450 a day, if i setup a limited company, what the take home pay would be!

I seen a site, that said 4000 after tax, but it seemed a bit low?

thanks
Neil

BailMeOut

It depends on your tax deductions but estimate on maybe taking home 60% to 65% of this.

Run the number through an online tax calculator - eg http://taxcalc.ie/budget-2013/

ChRoMe

BailMeOut wrote: »

It depends on your tax deductions but estimate on maybe taking home 60% to 65% of this.

Run the number through an online tax calculator - eg http://taxcalc.ie/budget-2013/

True, however isint it the case that you can claim the tax back on a huge amount of purchases, the actual take home is a lot higher?

BailMeOut

ChRoMe wrote: »

True, however isint it the case that you can claim the tax back on a huge amount of purchases, the actual take home is a lot higher?

cannot imagine too many deductions as a software developer other than maybe purchasing software development tools and a computer.

I am in IT consulting and there are very few deductions I can claim other than my small home office.

KonFusion

BailMeOut wrote: »

cannot imagine too many deductions as a software developer other than maybe purchasing software development tools and a computer.

Talk to your accountant. You can also claim pretty much anything (apart from booze).

ChRoMe

BailMeOut wrote: »

cannot imagine too many deductions as a software developer other than maybe purchasing software development tools and a computer.

I am in IT consulting and there are very few deductions I can claim other than my small home office.

Phone, lunch, transport, there should be a huge amount? Its *anything* related to the rendering of your services.

neil_hosey

60 - 65% is a good number considering what i take home with a permanent job!

Ive also wondered can i put all my petrol, lunches etc related to the company against it.. getting 20% back of these?

BailMeOut

neil_hosey wrote: »

60 - 65% is a good number considering what i take home with a permanent job!

Ive also wondered can i put all my petrol, lunches etc related to the company against it.. getting 20% back of these?

if the expenses are true business expenses then yes. If not then no and I would not think that normal commuting costs and lunch would be deductible. If you have to do out of town trips to clients then you can probably write these off as long as the client is not reimbursing you for them.

Talk to an accountant about what receipts you should keep and deduct.

I am an contractor in IT and work from home and there are very few things I get to deduct.

ChRoMe

BailMeOut wrote: »

I would not think that normal commuting costs and lunch would be deductible. If you have to do out of town trips to clients then you can probably write these off as long as the client is not reimbursing you for them.

Agreed with talk to an accountant, but lunch and commute are *directly* related to providing your services, and all contractors I know claim them back (and more)

BailMeOut

ChRoMe wrote: »

Agreed with talk to an accountant, but lunch and commute are *directly* related to providing your services, and all contractors I know claim them back (and more)

no proper accountant will advise you that lunch or normal commuting is tax deductible when self employed.

percy212

Lunch and entertainment should be deductible to an extent, if they are 'business' related e.g. maybe you took a client out....

Draco

Your commute isn't an allowable expense under Revenue rules:
http://www.revenue.ie/en/tax/it/leaflets/it51.html

Journeys between an employee’s home and place of work (and vice versa) are not business journeys and any reimbursement of motoring expenses (including taxi fares) in respect of the cost of such journeys is taxable.

I'm not sure about lunch - they're not specify mentioned as an allowable expense (http://www.revenue.ie/en/business/running/allowable-expenses.html) but if you're expensing them it looks like they'd be taxable as a BIK (http://www.revenue.ie/en/tax/it/employee-expenses.html#section3).

The long and short of it is talk to an accountant.

ChRoMe

Draco wrote: »

Your commute isn't an allowable expense under Revenue rules:
http://www.revenue.ie/en/tax/it/leaflets/it51.html

Thats talking about employees though which is a different scenario.

BailMeOut

ChRoMe wrote: »

Thats talking about employees though which is a different scenario.

It will depend on the OPs situation.

If the OP normally works from home but has to visit clients at various places during the day then he maybe able to deduct these expenses.

If he/she is contracting with one company and working at that same company every day and is getting to and from there each day via car/bus/train then these expenses are not deductible.

ChRoMe

BailMeOut wrote: »

It will depend on the OPs situation.

If the OP normally works from home but has to visit clients at various places during the day then he maybe able to deduct these expenses.

If he/she is contracting with one company and working at that same company every day and is getting to and from there each day via car/bus/train then these expenses are not deductible.

As a contractor there is no difference, you are still not an "employee" (which is why they have to pay such large daily rates) which is what the link refers to. I think you might need a new accountant?

Draco

The key phrase is "place of work". Unless you regularly work from a home office you're going to have a hard time convincing revenue that your commute is a valid business expense.

Graham

ChRoMe wrote: »

As a contractor there is no difference, you are still not an "employee" (which is why they have to pay such large daily rates) which is what the link refers to. I think you might need a new accountant?

Employment status doesn't come into the travel/commute side of expenses, that's down to your normal place of work. If you are trying to claim travel between your home and the same office 5 days a week, it isn't going to take revenue long to conclude which is your normal place of work.

neil_hosey

the take home from that tax calculator is 4700 a month around. thats about 57% after tax..

assuming i cant put anything (lunch/petrol/rent) against VAT thats what I would be clearing. I thought it would have been more tbh.. unless I'm doing something wrong.

percy212

Get a decent accountant. You can expense most of your food/travel/partial rent for home office etc if its handled correctly. There is always a way.

BailMeOut

are you married, kids, mortgage, health insurance, home office, pension contribution, etc... Your accountant will tell you now how to maximize your tax deductions thereafter.

neil_hosey

Thanks alot.. i think ill go tomorrow at lunch to see if its worth it!

realgolfgeek

neil_hosey wrote: »

Thanks alot.. i think ill go tomorrow at lunch to see if its worth it!

If I have a permanent job which pays me around 70 to 80k say,
and I have paid holidays, VHI, pension etc ... I wouldn't bother with 450 a day.

srsly78

Permanent jobs are really boring and you don't get to take as much holidays as you like. Also you pay BiK on all those perks and have no control over them. How annoying to pay extra tax on stuff you don't even want!?

Contracting gives lots of variety and chances to travel. Lots of different workplaces, lots of more varied experiences - both social and technical. Conversely imagine being stuck in one place and only knowing one way to do things... No wonder all the work ends up being done by contractors

There are lots of sweet contracts abroad in places like Belgium and Germany, but you really don't want to pay tax there. 6 months contracts can be done without becoming resident.

jimmycrackcorm

realgolfgeek wrote: »

If I have a permanent job which pays me around 70 to 80k say,
and I have paid holidays, VHI, pension etc ... I wouldn't bother with 450 a day.

Where contracting really benefits is in a common scenario of a married couple with one contracting but taking as little earnings out of it as possible (i.e. the other person pays most of the bills). Then at the end of the year the contractor can take profits from the accumulated earnings of his company at the 12.5% corporation tax.

srsly78

jimmycrackcorm wrote: »

Where contracting really benefits is in a common scenario of a married couple with one contracting but taking as little earnings out of it as possible (i.e. the other person pays most of the bills). Then at the end of the year the contractor can take profits from the accumulated earnings of his company at the 12.5% corporation tax.

Nooooo. You would be paying tax twice then... Corp tax, then income tax. Even worse, as a service company your retained earnings (profit) get hit for about 50% tax (not the 12.5% normal corp tax). Most Irish contractors want to make ZERO profit, because this is what they pay corp tax on.

Married couples benefit because they have more tax credits, it only works out if one partner doesn't earn.

You might be referring to the UK, where things like dividends are treated completely differently.

BrokenArrows

KonFusion wrote: »

Talk to your accountant. You can also claim pretty much anything (apart from booze).

It improves my coding skills so its a work tool. haha.

slegs

Draco wrote: »

The key phrase is "place of work". Unless you regularly work from a home office you're going to have a hard time convincing revenue that your commute is a valid business expense.

There is no convincing involved. Most contractors have their home officially as place of work for their limited company. Travelling to and from the client site is a business expense as is lunch when you get there.

Contracts are short term by nature and clients and their site locations will vary by definition. These various sites should not be defined as your place of work for tax reasons if you are providing a short term service to the client. You are not their employee, you are providing an invoicable service same as an electrician, solicitor, etc

It is perfectly reasonable, legitimate and in fact the correct way to operate as a contractor.

ChRoMe

slegs wrote: »

There is no convincing involved. Most contractors have their home officially as place of work for their limited company. Travelling to and from the client site is a business expense as is lunch when you get there.

Contracts are short term by nature and clients and their site locations will vary by definition. These various sites should not be defined as your place of work for tax reasons if you are providing a short term service to the client. You are not their employee, you are providing an invoicable service same as an electrician, solicitor, etc

It is perfectly reasonable, legitimate and in fact the correct way to operate as a contractor.

++

DublinWriter

slegs wrote: »

There is no convincing involved. Most contractors have their home officially as place of work for their limited company. Travelling to and from the client site is a business expense as is lunch when you get there.

Revenue class a place of work as the location from which you 'normally' work, not 'officially' work.

Throwing a desk and chair into the box room and 'pretending' that you're working from home won't cut it.

Revenue have very recently clarified this and have outlined typical scenarios here

You can only pay yourself the same rates for travel and subsistance that Revenue pay their own staff. This is all dependant on engine size and total miles travelled per annum. You'll need to know all this stuff inside out.

DublinWriter

srsly78 wrote: »

Permanent jobs are really boring and you don't get to take as much holidays as you like....
Contracting gives lots of variety and chances to travel. Lots of different workplaces, lots of more varied experiences - both social and technical.

The one big downside to contracting is career progression.

As a contractor it's very easy to get stuck doing the same thing again and again - it's a rare client who will pay to skill you up.

Also, a lot of contract work tends to be the stuff that none of the permanent staff want, or can do.

Plus, there will always be a level of resentment with permanent staff you work with and you typically won't be invited to departmental meetings or asked to engage in any wider decision making programmes.

ChRoMe

DublinWriter wrote: »

Plus, there will always be a level of resentment with permanent staff you work with and you typically won't be invited to departmental meetings or asked to engage in any wider decision making programmes.

That is not resentment, that's exactly as it should be, you are a freelancer you have no place in those situations. Its odd that is how you perceive it.