Builder/developer profit margins etc

[Zyp]

I don't work on a day rate either, but I know how long a job will take and just multiply my date rate for the quote (plus materials)

Often been told I'm too cheap, but sometimes missed out on a job because another guy was cheaper.
It's nice to make a living, have a day off when I like, and to not just be chasing the dollar.

As for being VAT registered - no thanks!

[Boshly]

blade7 said:

I've never asked for a day rate, just the price for the job. A sparks asked why he didn't get the job, I told him he was £800 higher and he came back with the profit comment. Perhaps I'm missing something, self employed people I know tell me the costs of running the business are deductible against income tax.

You don't really have a grip on this. To be fair though i hear this time and time again. The costs of running a business aren't deductible against income tax. The majority of costs of running a business are deductible against income for tax purposes. There is a difference.

For clarity (arbitrary example) it isn't "I've earnt £48k my costs are £10k my tax liability is £12k therefore I pay £2k tax" it is "I've earnt £48k my costs are £10k my taxable income is £38k therefore I pay £9.5k of tax". A big difference.

You still pay tax, and NI and Employers NI on your hourly wage and profit. Exactly the same as an employed person would (excluding the Employers NI which his company would pay on their behalf) on their salary and bonus.

It's obviously a bit more complex than this simplified example but it does frustrate me when people think companies (or the self employed) pay things "out of their tax".

[Boshly]

jason61c said:

Condi said:

Are you a fking idiot?

If you pay a plumber £20 an hour for a job, over the total year they might only take home £7/hr. The other £13 goes on running the van, time pricing up jobs, invoicing, holidays etc. In which case 'wages' and 'profit' are from the customers point of view the same, but from a business point of view quite different.

All business have a provision for bad debt, but if you pay £1 for a loaf of bread at the supermarket you have no idea how the costs break down, how much is profit, how much is provision for bad debt, how much the CEO uses for hospitality...

I really can't see how a single plumber would be working for the figures you've quoted above? At £13 an hour to cover a van etc he needs to take the Bugatti engine out.

I appreciate the above £20/hr and £7/hr are slightly arbitrary numbers but they're not as outrageous as you make out.

assuming he works 40 weeks a year (6 weeks holiday and BH's, 6 weeks over the year trainig/estimating/setting jobs up/organising materials/sick etc.) @ 40 hours a week that gives him 1600 hours @ £13/hr or £20,800.

Now wages for those 12 weeks at £7/hr is approx £3.5k, annual insurance, accountants fees, training courses and trade membership £4k? Fuel £3k? Insurance £1k tools and incidentals £1500 advertising £1k? That leaves £6800 to buy and run and maintain a van per annum. A tidy amount maybe but no Bugatti engine in sight.

I personally think the £13/hr for costs is probably accurate but the £7/hr for earnings is more likely low.

[Pheo]

Boshly said:

NI which his company would pay on their behalf) on their salary and bonus.

It's obviously a bit more complex than this simplified example but it does frustrate me when people think companies (or the self employed) pay things "out of their tax".

Ive seen it done with big ticket items with some biz justification eg laptop notionally for business but used extensively personally. But you are right this reduces the corporation tax liability not the income tax for an individual.

Although iirc you then pay a dividend meaning less tax... Rather than an income.

[Boshly]

Absolutely, you can reduce your corporation tax liability and you have more opportunity to do so etc but you still have to pay income tax on your income as does a normal PAYE person; though in your example above the laptop would be bought from untaxed income as opposed to taxed for the PAYE guy.

As for dividends well that's a different ball game altogether again and the biggest saving is on NI not so much the tax.

However there is no doubt that being self employed or running a company has advantages as well as risks. The easiest way I (regularly) describe it is that with running your own business "the highs are higher and the lows are lower". Take your pick

[worsy]

It's an interesting discussion. When I built, or paid for my house to be built my builder was upset with the sparky he employed as he added an element of profit to the job. My builder couldn't understand why someone wanted a salary AND profit.

[blade7]

Boshly said:

blade7 said:

Perhaps I'm missing something, self employed people I know tell me the costs of running the business are deductible against income tax.

You don't really have a grip on this. To be fair though i hear this time and time again.

I hear it time and time again too, usually from the self employed, perhaps they don't "have a grip" on it either ?

[groucho]

worsy said:

It's an interesting discussion. When I built, or paid for my house to be built my builder was upset with the sparky he employed as he added an element of profit to the job. My builder couldn't understand why someone wanted a salary AND profit.

I can understand it; your sparky's profit was eating into your builder's profit and he didn't like it.

[worsy]

groucho said:

worsy said:

It's an interesting discussion. When I built, or paid for my house to be built my builder was upset with the sparky he employed as he added an element of profit to the job. My builder couldn't understand why someone wanted a salary AND profit.

I can understand it; your sparky's profit was eating into your builder's profit and he didn't like it.

Actually no. They were extras. I paid for them

[Backtobasics]

Renovation said:

Backtobasics said:

Arrives at 8, has 10 cigarette breaks, then leaves at 4pm

Is his name Rob because he sounds like mine !

But he's charging me £145 !

Close...Ray!