Calculating a Freelance Day rate from PAYE

moneytorques

If love some assistance with this conundrum!

Just set up a Limited Company, 2 directors shareholders.
Leaving a paye position paying £55000 Gross.
33 days paid annual leave (inc. 8 bank hols) and 5k p.a paid travel expenses. Standard Nest Pension rates.

How do I go about calculating what the equivalent DAY rate is that I should be charging the new Client to equate to the same package I was receiving as an employee?

20% CIS deducted at source from Client.

Many Thanks.;)

moneytorques

Anyone steer me to a calculator instead?

Tom99

[FONT=Verdana, sans-serif]Lets say current days worked is (52 x 5) – 33 – say 7 (sick pay?) = 220 days[/FONT]
[FONT=Verdana, sans-serif]£55,000 + NI say £5,500 + Pension say £1,650 + travel £5,000 + Office Accommodation? Say £5,000 + anything else you can think of = £72,150 call it £75,000.[/FONT]
[FONT=Verdana, sans-serif]£75,000 / 220 = £341 but call it £350 per day or £50 per hour.[/FONT]

comeandgo

Cis deducted at source has nothing to do with the rate you charge, other than deducted from your gross amount, this is between your company and HMRC. You get back any cis tax that you have overpaid.

trailingspouse

I don't think there's a magic formula.
From experience, it's more than you think it will be.
You need to charge enough to cover your costs (to the figures mentioned above, add the cost of an accountant, professional indemnity insurance, tools and equipment, mileage...), but if you charge too much you will price yourself out of the market.

What do other people in your industry charge? What does your accountant suggest? What figure does your business plan use? And where do you stand re IR35?

motorguy

Tom99 wrote: »

[FONT=Verdana, sans-serif]Lets say current days worked is (52 x 5) – 33 – say 7 (sick pay?) = 220 days[/FONT]
[FONT=Verdana, sans-serif]£55,000 + NI say £5,500 + Pension say £1,650 + travel £5,000 + Office Accommodation? Say £5,000 + anything else you can think of = £72,150 call it £75,000.[/FONT]
[FONT=Verdana, sans-serif]£75,000 / 220 = £341 but call it £350 per day or £50 per hour.[/FONT]

Thats pretty much it - i aim to be revenue earning for 45 weeks a year so roughly 220/225 days a year

Also running through a limited company would reduce the tax burden.

Also all your costs would come off your gross margin before tax.

I would say £65-70K all in which is around £300 a day.

From my perspective thats roughly my break even rate. The reality is though you pitch at what the market will pay which for most skilled contractor jobs is £400-500 a day.

trix-a-belle

I've been playing around on this front recently also due to an opportunity that has arisen for me & have come up with a figure I'm happy with based on similar calculations to the above. But somewhat noob question (apologies) I've seen you should always state your day rate & that it would be plus vat, is this the case even if you're not vat registered? (I'm running as sole trader self employed currently)

comeandgo

No, you don't add the plus vat as you are not vat registered. When you are vat registered then you need to be very clear whether your rate includes vat or not.

dont_use_vistaprint

You cant base your day rate on your PAYE salary/benefits, as said above its about demand.

I charge £500, but haven't put my rates up for 3 years. Its still higher than contractor rates, but I have USP's and work with clients who know me.

Your'e aiming for a billable ratio of over 60%. If you factor in just 20 days holiday that jumps to over 65%, is that realistic for a director? I spend over 1/3 of my time on sales and aim to be 50% billable