ContractorCalculator was the first contractor and freelancer website to have updated its comprehensive online interactive contractors with the very latest tax data. These now provide accurate, up-to-date calculations covering IR35 as well as all other personal and business figures of interest to flexible workers. New calculations and extended functionality have also been added.
According to ContractorCalculator CEO Dave Chaplin, a former City IT contractor who leads our IT development team, the updates and changes this year have been the most demanding in the website’s ten-year history, taking weeks of IT development and testing time. Despite this, the new calculators have been available since the start of the financial year.
“This tax year, higher earners face complex tax arrangements, with new tax rates, changing personal allowances and brand new taxes,” explains Chaplin. “So, to ensure that the calculators function accurately 24/7, our calculators undergo almost a thousand individual regression tests.”
New contractor tax calculators
In addition to the existing contractor, permanent employee, small business and taxation calculators, Chaplin has added new calculations and extra functionality that allows calculation of:
- Dividend tax, including the new higher rate
- PAYE/National Insurance Contributions and net salary, including the new higher rates
- The effect of the budget on contractors and permanent employees.
These calculators take into account the major changes introduced on 1 April 2010, which include:
- Diminishing personal allowances for those earning over £100,000
- The new 50% tax band
- The new dividend tax at 42.5% for dividend income over £150,000.
Contractor impact
As Chaplin explains, the new contractor calculators provide a level of flexibility and detail not yet available on other contractor and freelancer websites: “The changes introduced this year are potentially very nasty for high-earning contractors. Previously, contractors earning over £100,000 per year could mitigate the impact of the previous higher rate tax band by paying a low salary and high dividend.
"That’s all changed,” he continues. “Now gross income, that’s earnings from any source including dividends, over £100,000 results in a loss of personal allowances of £1 for every £2 earned. Contractors earning between £100,000 and £112,950 are taxed at a staggering rate of 60%!”
The changes introduced this year are potentially very nasty for high-earning contractors
Dave Chaplin, ContractorCalculator
Dividends over £150,000 are now liable for a tax charge of 42.5%, and earnings over that amount are now taxed at the new 50% rate. The Dividend Tax Calculator will work out how much tax is liable.
Tax bands frozen and new taxes forecast
Chaplin adds: “In a final insult to all contractors, not just those who are being punished because their highly developed skills command a high premium, the personal allowances have been frozen, resulting in ‘fiscal drag’. This means everyone works a little longer for the Chancellor before earning anything for themselves.
“Personal allowances normally increase in line with inflation, which ensures we don’t pay more than our fair share of tax,” says Chaplin. “The freeze was justified by the Chancellor who claimed that inflation in 2009 was negative, which was not the case. What we have here is a classic stealth tax.”
Chaplin warns further tax increases are to come: “We know National Insurance Contributions (NICs) are set to rise in 2011, and we anticipate another Budget shortly after the election – whoever wins. We can confidently predict that will include extra taxes, which means more contractor tax hikes to come, and more work on our calculators!”
‘White label’ online tax calculators
When using online tax calculators, contractors should take care to ensure they are always up to date. They can do so either by using the calculators on this website, or versions licensed to others. For example, contractors who are customers of contractor service providers such a Qdos Consulting, PCG (formerly the Professional Contractors Group) and CW Jobs are all using a white label version of ContractorCalculator’s online tax calculators, which are updated seamlessly as part of Chaplin’s ongoing support.
Dave Chaplin is a former IT contractor in the City of London, and is founder and CEO of ContractorCalculator, and author of the Contractors' Handbook.
Started in 1999, ContractorCalculator (this site) is the leading independent website for the UK contracting industry – most of whom are highly skilled knowledge workers.
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“Any organisation licensing our calculators for use by its customers will notice no change in or disruption to services because of these changes,” comments Chaplin. “The only change they’ll see, of course, will be from having a totally up-to-date calculator with all the latest tax data!”
Published: Monday, April 12, 2010
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