Money, Cost and Professionalism 2
December 4, 2013 § Leave a comment
Design Practice In Context 2 Lecture 4/12/13
Continuing from last week. Hypothetically, if we were on a rate of £25 an hour then the yearly income works out as follows:
£25 x 8 hours = £200
£200 x 5 days = £1,000
£1,000 x 4 weeks = £4,000
£4,000 x 11 months = £44,000 pa (per annum)
However, work is not constant – so this is only an estimate. Time is taken off to do finances, holidays and time off being sick. We need to appreciate this pattern of work and understand that at times there will be periods of heavy work and other times light work. The amount earned over a year is more likely to be at around £35,000. Then we take into consideration some outgoings – Gross Income, Tax, National Insurance, Pension Schemes…these costs will make the figure approximately £24,000. This is why it is important to know exactly what your costs are.
The amount you get taxed is dependant on how much you earn a year:
£0 – £7,000: 0% tax
£7,000 – £21,000: 10% tax
£21,000 – £42,000: 25% tax
£42,000 – £50,000: 40% tax
£50,000+: 50% tax
These figures change all the time however. We need to make sure we’re in the right tax bracket and assure we figure out our costs effectively. This then has an input to our cash flow.
A budget is a set amount of money that is committed to a project. You should not go over the budget, as it can cause major problems. Budgets have a lot to do with expenditure or money that is going out. This then has an effect on tax and shareholders – there is a whole range of things that budgets can have an effect on. They tend to be managed by people with less experience. If you are to manage a budget, you have to appreciate that if it goes awry, there can be an extreme impact on the business.