4 ms·

Out of curiosity, how bad are taxes? How much of that 20k could a developer actually expect to take home? To give an example, I live in Seattle in the US (whic

by jsolson 12y ago

Out of curiosity, how bad are taxes? How much of that 20k could a developer actually expect to take home? To give an example, I live in Seattle in the US (which is relevant as many states in the US apply additional taxes on top of those applied federally). My effective tax rate is probably somewhere around 35-40% of my gross income. I'm curious if devs in the UK are looking at a similar deal, or if more than half of that 20k per month is going to evaporate into taxes... also how does that vary for contract versus permanent work (in the US it would cause an immediate 7.5% bump in my tax rate, I believe).

toyg 12y ago
UK is not Scandinavia or France. Effective taxation on personal income is on similar levels as US. Contractors have a different set of rules from regular employees but they end up paying more or less the same tax (often less, if they have a smart setup -- corporation tax is lower than income tax); there are other disparities (it's harder to get loans/mortgages etc) but not tax afaik.
petercooper 12y ago
If that 20k is net of VAT, and you're working through your own limited company, in the best possible case you could take home £17,767.20 of that £20,000 for an effective tax rate of 11.2%. How? Start with the 20k. Pay yourself a 10k salary (tax free, pay £232.80 in national insurance). Pay 20% corporation tax on the remaining 10k (£2000). Pay the remainder to yourself as a dividend (which already has a tax credit applied and results in a 0% liability up to a certain limit). Now, this does make the assumption this is either the first month of your tax year or the only income you make ;-) If you were to make 20k EVERY month, you would start to increase through brackets and pay more tax on the dividends. By my calculation using ContractorUK's dividend tax calculator, at 20k every month and assuming no deductions at all, you'd pay around £53k on the total £240k for an effective tax rate of 22%, but I could be wrong. You would also be likely to pay more tax since you'd probably pay yourself a salary despite the loss of personal allowance in order to keep your state pension privileges. Broadly speaking, direct taxation on income is generally lower than many situations in the US. It's the consumption taxes like VAT (20%) and fuel duty (the majority of the price of fuel) that bump things up a lot. I should also note that if you merely happen to be self employed rather than own your own company, your taxes are actually LOWER here than if you're employed - no equivalent to the "self employment tax" I've heard of in the US.

by jsolson 12y ago

toyg 12y ago

UK is not Scandinavia or France. Effective taxation on personal income is on similar levels as US. Contractors have a different set of rules from regular employees but they end up paying more or less the same tax (often less, if they have a smart setup -- corporation tax is lower than income tax); there are other disparities (it's harder to get loans/mortgages etc) but not tax afaik.

petercooper 12y ago

If that 20k is net of VAT, and you're working through your own limited company, in the best possible case you could take home £17,767.20 of that £20,000 for an effective tax rate of 11.2%. How? Start with the 20k. Pay yourself a 10k salary (tax free, pay £232.80 in national insurance). Pay 20% corporation tax on the remaining 10k (£2000). Pay the remainder to yourself as a dividend (which already has a tax credit applied and results in a 0% liability up to a certain limit). Now, this does make the assumption this is either the first month of your tax year or the only income you make ;-) If you were to make 20k EVERY month, you would start to increase through brackets and pay more tax on the dividends. By my calculation using ContractorUK's dividend tax calculator, at 20k every month and assuming no deductions at all, you'd pay around £53k on the total £240k for an effective tax rate of 22%, but I could be wrong. You would also be likely to pay more tax since you'd probably pay yourself a salary despite the loss of personal allowance in order to keep your state pension privileges. Broadly speaking, direct taxation on income is generally lower than many situations in the US. It's the consumption taxes like VAT (20%) and fuel duty (the majority of the price of fuel) that bump things up a lot. I should also note that if you merely happen to be self employed rather than own your own company, your taxes are actually LOWER here than if you're employed - no equivalent to the "self employment tax" I've heard of in the US.