Quick Premium Charge question

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jamesedwards
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I've just realised there is a difference in the profitability ratio triggers for Lower and Higher rate PC, and that it's much easier to trigger Higher Rate PC than it is to trigger Lower Rate PC.

Am I correct that Lower Rate PC is triggered with any [Commission Generated / Gross Profit] ratio under 20%, whereas Higher Rate PC is triggered with the same calculation but with any ratio under 40%? Thereby someone with a steady profit ratio of between 20%-40% would move straight from zero PC to Higher Rate PC when they reach the "magic" £250k net profit figure?
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Derek27
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jamesedwards wrote:
Tue Apr 27, 2021 3:42 pm
I've just realised there is a difference in the profitability ratio triggers for Lower and Higher rate PC, and that it's much easier to trigger Higher Rate PC than it is to trigger Lower Rate PC.

Am I correct that Lower Rate PC is triggered with any [Commission Generated / Gross Profit] ratio under 20%, whereas Higher Rate PC is triggered with the same calculation but with any ratio under 40%? Thereby someone with a steady profit ratio of between 20%-40% would move straight from zero PC to Higher Rate PC when they reach the "magic" £250k net profit figure?
Yes, that's always been my understanding. That said, if you're consistently paying 30% and you hit the 40% PC bracket, it should be no more a shock than if you're paying 10% and hit the 20% bracket.
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jamesedwards
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Thanks. So effectively once you breach £250k net profit (and over 1000 markets) your PC will be charged at the following rates regardless of any other criteria:

Lifetime Commission Generated / Gross Profit ratio:
<5% = PC of 60%
5%-10% = PC of 50%
10%-40% = PC of 40%
>40% = PC of 0%.

Is this correct assumption? I was thinking of trying to get my ratio up to 20% but if I am correct this is pointless and the only realistic target for me would be to get to 10%.
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Derek27
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As far as I know that's correct. I'll leave it to a 40% payer to correct me if I'm missing anything. :)
rik
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Yes everything said in this thread is correct.
When total profit >250k it and total generated >10% you just pay the difference to 40 so no point aiming for a higher percentage than 10
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jamesedwards
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thanks both
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ShaunWhite
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rik wrote:
Tue Apr 27, 2021 4:46 pm
Yes everything said in this thread is correct.
When total profit >250k it and total generated >10% you just pay the difference to 40 so no point aiming for a higher percentage than 10
I don't pay PC2 so excuse this if it's wrong, sure any dent in the end of week lump helps?

If you paid 20% through the week just because that's a product of what you do, and someone else only generated 10% while earning the same net amount, you'd have 20% taken and they'd have 30% taken? For me what makes it tricky to picture is the fact that you're generating your comm paid on your gross, and then the resulting figure gets applied to your net. They certain haven't made it easy to understand.
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jamesedwards
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ShaunWhite wrote:
Tue Apr 27, 2021 6:18 pm
rik wrote:
Tue Apr 27, 2021 4:46 pm
Yes everything said in this thread is correct.
When total profit >250k it and total generated >10% you just pay the difference to 40 so no point aiming for a higher percentage than 10
I don't pay PC2 so excuse this if it's wrong, sure any dent in the end of week lump helps?

If you paid 20% through the week just because that's a product of what you do, and someone else only generated 10% while earning the same net amount, you'd have 20% taken and they'd have 30% taken? For me what makes it tricky to picture is the fact that you're generating your comm paid on your gross, and then the resulting figure gets applied to your net. They certain haven't made it easy to understand.
Yes, but I was referring to additional commission generation specifically for the sake of reduced PC rate/band. eg churning £20k at a cost of a percent or two, but generating enough commission towards PC to net off flat, whilst simultaneously growing your comm to profit ratio as a result.
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ShaunWhite
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I get it James. I just didn't mention churning, just the principal that generating commission through the week surely helps. If you're fortunate enough to have something that churns net breakeven and generates over 40%, or your profitable strategy just generates 40% anyway then you wouldn't have a deduction at the end of the week? Or if it generated 38% then you'd only pay 2%

Probably all academic for manual traders where time = money and you'd probably just be better off earning more than trying to swerve charges on the other money you've made.
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