If you are a contractor or freelancer already operating through a limited company or perhaps you are considering doing this then you’ll want to download our contractor take-home pay calculator so you know how much tax you are going to pay and how much your take-home pay will be.

We have provided a free excel calculator that models this for you for the 2015/16 tax year which is available for download HERE.

UPDATE 1: Check out our new article : salary and dividend guidance for 2016/17

UPDATE 2: We now have a new article with 16/17 take home pay calculations

contractor take home pay calculator 15-16

Instructions:

  • In the “Input Data” section enter your day rate, total days worked per year, your VAT flat rate scheme percentage and your business expenses excluding your salary (you can often make extra profit by being VAT registered on the flat rate scheme, see our case study here).
  • Your company profit and loss account is then shown below the inputs where it shows your maximum dividends and the corporation tax payable.
  • Underneath the profit and loss account it shows your personal income and any personal tax payable (if your dividends go into the higher tax band you pay personal tax on the element that goes into the higher tax rate).
  • At the very bottom it highlights your annual and monthly take home pay after factoring in personal and company taxes.

Assumptions:

There are many variables that affect how your take home pay is calculated so we have made the below assumptions for this calculator to keep things as simple as possible and to fit the most common scenarios:

  • You are contracting through a UK limited company and you are the sole shareholder and director. Both you and the company are UK resident for tax purposes.
  • You are not caught by IR35.
  • You are VAT registered, providing services to UK companies and you are on the Flat Rate Scheme , we have also ignored the first year 1% discount
  • You take out the maximum amount of dividends that you can from your company – the alternative to this which is worth considering is to not take dividends above the higher tax band and build profits up in the company, see here.
  • Your only income is the salary and dividends from your company and you are on a monthly salary of £670 per month.
  • All your business expenses are allowable for tax – there are some expenses such as business entertaining which is not allowable but we have kept things simple.
  • You do not have a student loan balance.
  • Your personal gross income is below £100k – once you go over £100k your personal allowance starts being withdrawn which is complicated to model. Also once your income goes over £150k you hit the upper tax rate.
  • You are on a standard tax code of 1060L.