Income

The income is divided into three smaller categories: Gross Income, Expenses and Payments(Pay Breakdown). Some of these are inputs given by you. These inputs are located in the Lobby fields. To see how the lobby system works please follow THIS link. To see how the taxes are calculated go HERE.

1 Gross Income

1.1 Rate << The gross amount of money you earn in an hour. This may be stipulated in a Contract (e.g. Contractors) or estimated (e.g. taxi drivers or other types of self employed people)

1.2 Per day << This is the average number of hours that you work and get paid for during a day

1.3 Days << refers to working days during a month

1.4 Extra hours << refers to all paid overtime over the total number of months

1.5 No. of months << what is the interval for the calculations (1=monthly, 3=quarterly, 12=yearly, etc.)

2 Expenses and additional income

Allowed expenses are reimbursed from the LTD profit. They do not count as income towards taxes as far as HMRC is concerned. Go HERE to find more about expenses.

2.1 Subsistence per day << total value of food and drinks bought while working.

2.2 Mileage/day << If you use your personal car for business purposes (e.g. travel to the supplier) you can deduct 45p for each mile up to 10000miles/yr. After that the rate is 25p/mi. Company cars have a different system which is not included into the tool.

2.3 Mileage adjustment << If the miles/day * no of days * no of months do not match your personal calculations use +/- values to adjust it properly

2.4 Other expenses << Anything that classifies as an expense (e.g. computer hardware, etc.) If the expense is recurrent make sure to put the entire value as the file only calculates this ONCE (does not multiply this with no. of months).

Valid expenses have to be justified for your work activity (e.g. you cannot add your £350 suit as an expense, though it would be nice).

2.5 Accountant's fee per month.

2.6 Other income << Any income that is not generated by your standard rate per hour.

3 PAY Breakdown

After paying or putting aside all the money HMRC will eventually take for taxes it's time to collect some yourself. However, same as with taxes you cannot simply take everything. You have to break the income in relevant categories. You need to make a separate payment for each individual category of income.

3.1 Salary << This sum should be transferred as your salary without any additions to it.

3.2 Expenses << What you spent to do your job you take back the following month. (e.g. you consumed £200 on work food, next month you get £200 back). This does not count towards the higher rate because you already spent this money from your pocket. You just get it back. The actual income from this is 20% of the expense itself as the expense does not count towards corporation tax.

3.3 Dividends << This is the bonus you give yourself for a job well done. It comes with a dividend tax that you must pay when you make your self assessment. You don't have to transfer it all if you don't actually need it because it counts towards the higher dividend limit thus more taxes in the end. However, at the start of each fiscal year the dividend counter resets. That means that you cannot take more than the basic rate without paying extra tax even if the profits were made last year. The calculation for this value is made so you can actually get all of the dividends without exceeding the higher limit.

3.4 Extra Dividends << This is the amount of money you can have above the basic rate (higher rate) while still being able to pay the tax for it. If you take this you should consider the higher Dividend Tax value (32,5%).

Dividend calculation is dependent of the actual profit that the LTD has after taxes and expense payment as well as all the possible allowances. The tool works out a way that you can take all available dividends while being able to keep the tax money in your business account.

3.5 Take Home

3.5.1 NET Income << The money you can transfer into your personal account while being able to pay all the taxes and stay below the higher limit. Sometimes you may have some profit in the LTD that if taken out will count towards the higher tax. If you don't need it just leave it there for future investments.

3.5.2 MAX Income << The TOTAL amount of money you can transfer into your personal account while being able to pay all the taxes but go above the higher limit.

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