Contractor Calculator

UK contractors as high earners have always been heavily taxed by the HMRC tax and that is why they often use an online Contractor Calculator.

To make a long story short, a contractors calculator helps you to pay less tax(reducing your costs) and that means you have more profit at the end of the day.

this is a screenshot of an actual contractor calculator

What is a Contractor Calculator?

The savvy contractors use contractors calculators primarily because the contractor calculator helps them to check how much tax they can save on a certain contractor tax solution, usually these calculators are provided by either offshore or onshore tax avoidance systems.

What information is provided by a Contractor Calculator?

The Contractor Calculator will provide information such as an illustration based upon the contractors daily pay rate and usually a contractor who uses the calculator has to enter their email address and click on a authorization link in order to receive a customized report of their projected savings, and an overview of how the relevant tax solution works

Usually a contractor calculator will provide at least this basic information:

1. A personalised illustration or report on how much a contractor can save on thier contractor tax solution
2. an overview of the tax solution including frequently asked question and how the system works

I have put a screenshot below here so that you can see an example of what one of these personalised illustrations look like, it is a real illustration that a company sends prospective contractors so all the figures are accurate, I removed the name of the company so as not to promote the solution unfairly.

These tax avoidance systems are legal in the sense that although the HMRC prefers you didn’t pay less tax, they cant really do much about it as these tax solutions are often carefully designed to take advantage of maximum tax leveraging provided through trusts and other mechanisms.

Where do contractors find Contractors Calculators?

contractors usually find these contractor calculators by doing a search online, in google, there are also a few on facebook and even a iphone app that I managed to come across.

The one that I use and recommend would be the contractor calculator on the website contractor tax solutions.

I have included a screenshot of the contractor calculator as found on that site above, it is a simple email form, in order for a contractor to discover how much tax they could save they need to put in their name, a valid email address and also their daily pay rate… in this example you also get a box where you can ask any questions you have, which will be answered by the staff who work out your personal report(one would hope)

Why Do Contractors Use a Contractor Calculator?

• Contractors will use a contract calculator for a variety of reasons, to the best of my knowledge this is probably because they can make massive savings on their tax bill, for example a contractor can come home with 87% of his contract value by using some of these contractor tax reducing services – so it would be mostly a purely logical profit motive.
• Secondly a lot of UK IT contractors feel (possibly justified) that they are penalised for being high earners, as in the UK they are subject to some of the worst/highest taxes in the world- these are individuals who have spend a massive amount of time and money to master their field of expertise and earn well – only to have a huge amount of this swallowed by what they feel is unfair tax levels that penalise high earners. The HMRC has recently in the last few years even introduced ever new measures to try force contractors to pay more tax – eg: the IR35 law which most contractors feel is really unfair. In this situation contractors get treated and forced to pay taxes like a normal employee. without the benefit of permanent employment.. in other words they are contractors, contracts end at any given moment, and they have NO job security – this is why contractors get paid more, along comes the HMRC and they legislate a law forcing contractors operating limited companies and working for 1 client – to now pay PAYE levels of taxes.(This is financial suicide for most contractors)
• Using the systems provided by the operators of the contractor calculator, contractors can often avoid IR35 entirely especially if the operators are using a Self Employed model and a trust, as IR35 applied only to limited companies.
• Most operators of a contractor calculator also do tax returns for contractors removing a significant administrative burden from the contractors life.

Who does a contractor calculator benefit most:

Who is it for?

• not risk averse
• earning about 250 per day minimum (average contractor is about 400 sterling a day)

Mostly the calculator will only benefit contractors who are not totally risk averse, as there is always a chance that the HMRC could make a new law (and has in the past made laws and then gone after ‘back taxes owed in arrears’ in a sense saying ‘hey you were on this tax avoidance system, now you owe us for the 5 years you were on it chum’ – and they have taken several contractors to court just like this, – however they have been losing most of these cases.)

a contractor calculator benefits both the contractors who choose to use the operators service and of course the operators, who often charge fees varying between 9 -15% of the gross billing of the end client.