[Closed] Being self employed. Are we screwed in the next budget

Yes and Directors on dividends.

No we shouldn't pay the same level of tax as we create jobs and tax take.

I suspect everybody will be screwed to some extent (except those at the top). Taxes for self employed and employed should be broadly similar whatever the circumstances. In terms of perks, there are pros and cons for both. There has to be or we'd all be doing one or the other.

it doesn’t look too good being self employed at the next budget when it comes to tax

They said it was coming when they announced the coronavirus related help for the self employed last spring. Of course, all the self employed that pay themselves through transparent and normal measures will be hit, not just those who claimed or were eligible for the help. I currently have an offer of going PAYE, and I strongly suspect I’ll be better of for 2021/22 tax year if I take it up.

List the perks you think you're not getting.

Give them an estimated value.

Subtract any tax paid on these perks.

That should get you close to your answer - in financial terms at least.

I suspect everybody will be screwed to some extent (except those at the top).

This

I'm pretty stuffed. Last year I sorted all the IR35 compliance stuff but being honest I'm not going to get offered a fulltime PAYE roll at my age so I'd be part time on the books and I don't think the figures pan out well for me.

everyone is going to be screwed...apart from those rich enough to take advantage of the government sanctioned loopholes they lobbied for

No we shouldn’t pay the same level of tax as we create jobs and tax take.

Ok, Amazon.

Not quite Amazon.... certainly cant avoid corporation tax, PAYE, NIC or VAT.

SMEs are not well supported in the UK, we get lumped in with everyone else. There are very few benefits for SME limited company

If you create a company that employs people it means you have to invest time and money - take risks. If there is no reward for those risks then there is little in the way of drivers to create jobs and wealth.

If there is no reward for those risks then there is little in the way of drivers to create jobs and wealth.

A successful company will grow and generate profits. Unless those profits are taxed at 100% as well as any share sale taxed at 100%, there is a reward for the risk/effort. Given that no one is talking about 100% taxation, I really don't see what your argument is.

Do you think we should pay the same tax as an employed person. Just throwing the question out there.

Yes

I have a bunch of self employed friends. One paid 1/10th of the tax I did on similar earnings ( No real costs). all the fiddles of getting stuff claimed against tax, taking dividends rather than salary to avoid tax. all that stuff

It really really annoys me how little tax and NI self employed people pay

do you get the same perks as being employed. Do you think we should pay the same tax?

Worth remembering that 3.5 million self-employed people have been hung out to dry and haven’t received a penny in government support since last March, despite paying the same levels of tax as the employed

It really really annoys me how little tax and NI self employed people pay

I’m self-employed and pay my tax and NI on a PAYE basis, so I pay exactly the same as you. As do the vast majority of self-employed people. It’s a small, rich minority who get to take the piss

I would also question what perks you think I get that you do not

My tax and Ni are the same as when I was employed. Literally no difference.

seosamh77

You don't claim for transport, tools, equipment, cars etc etc?

despite paying the same levels of tax as the employed

You don't tho do you?

tjagain
Full Member
seosamh77

You don’t claim for transport, tools, equipment, cars etc etc?

I put costs related to my business in, why wouldn't I? People employed people don't pay tax on these things either, only difference is their company offsets the tax.

When I was employed for a company I wasn't paying for software licenses, office furniture, web space etc etc etc

I’ve been PAYE for 7 years now, but when I was a ltd co contractor there really wasn’t a massive difference in tax take.

21% company tax on profits
Employees and employers NI
Personal tax

It’s hard to make it all add up to exactly what a PAYE person would pay on same day rate, but it’s not far off.

You don’t tho do you?

Yes I do. Which bit of ‘I pay my tax and NI on a PAYE basis’ are you struggling with?

The supposed tax advantages are exactly that... supposed

In reality, there is no tax advantage

But don’t let that stop you asserting baseless nonsense as fact

Tax rates for self employed in scotland

Personal Allowance Up to £12,500 0%
Starter rate £12,501 to £14,585 19%
Basic rate £14,586 to £25,158 20%
Intermediate rate £25,159 to £43,430 21%
Higher rate £43,431 to £150,000 41%
Top rate over £150,000 46%

Plus
Class 4
Up to £9,500 nil
£9,500 up to £50,000 9%
Over £50,000 2%

Plus Class 2 Ni which is about £160 for the year.

There's no difference.

seosamh77

do you only claim for business costs or do you claim from "business costs" ie every little thing you can think of that could possibly be included?

I ask because thats what one of my self employed mates does. He drives for work as a freelancer. But he claimed for 2 cars and a motorcycle to be offset against tax plus his lockup and other stuff with at best only peripheral relationships to his work

I paid per month £820 tax ni and superannunation ( £200 effectivly a tax but one that gets me a small pension) on a gross income of £2350

Thats more than 30% or 25% if not including the superann

Edit - my pal above paid less tax in a year than I did in a month on a similar income

Binners - you don't claim against tax for stuff?

So what you’re basically saying here is that you think you pay too much tax?

Why don’t you just say that instead of throwing unfounded accusations at other people?

Binners – you don’t claim against tax for stuff?

when you’re at work, have you paid for the laptop you’re working on, the software licenses it’s running? Are you paying to heat the building you’re in? Did you buy the chair you’re sat on? The desk you’re leaning on?

I did

So, your mate is ripping the piss(till he gets audited would be my guess.) So we are all at it? 😆

@tjagain, if you think he’s taking the piss, report him.

Just because one person is doing it, it doesn’t mean all self employed people are money grabbing mercenary scum*.

*a phrase actually used by the head of technology in a major high street bank I was working for. Properly motivating that was...

No - what I think is the loopholes folk use to avoid tax need to be tightened up significantly.

the mate I referred to is not the only one - I know a load of self employed people and they all pay minuscule amounts of tax compared to those of us on PAYE

tjagain
Full Member
No – what I think is the loopholes folk use to avoid tax need to be tightened up significantly.

What do you think every company in the country does? Just cause employed people don't see this stuff doesn't mean it doesn't affect them.

If you don't allow costs to be offset, then everyone's wage would reduce significantly. Employed and self employed.

the mate I referred to is not the only one – I know a load of self employed people and they all pay minuscule amounts of tax compared to those of us on PAYE

Bollocks you do.

Unless you’re actively involved in defrauding HMRC you’ll be paying about the same

And if you’re defrauding HMRC you won’t get away with that for very long, I can assure you. And they’ll nail your arse to a tree when they collar you.

I’ve had my books audited and they go though them with a toothcomb and pick you up on even the tiniest of errors. I got a telling off because I’d entered the wrong price in the tax audit for postage stamps

tjagain
the mate I referred to is not the only one – I know a load of self employed people and they all pay minuscule amounts of tax compared to those of us on PAYE

I find it crazy you know this, I haven't a scooby what my mates pay in tax. 😆 Couldn't care less either.

binners
Full Member
defrauding HMRC

Yeah, this is the ultimate mistake you are making here TJ, assuming everyone is evading taxes.

I'm perfectly happy for my accounts to be audited.

Why do so many contractors resist going PAYE if that's the case?

No idea, I'm no a contractor.

Why do so many contractors resist going PAYE if that’s the case?

I’m a freelancer and pay all my tax and NI on a PAYE basis as it’s just easier. Most of the freelancers I work with do too

It really ****s me off the assumption from people in cushy jobs, with all the perks (no sick pay, holiday pay or employers pension or NI contributions for us) that we’re all on the fiddle and have all got yachts moored in Monaco payed for by defrauding HMRC 🙄

Particularly after a really, really difficult year where 3.5 million freelancers and self-employed have received absolutely zero government support. A lot are now destitute. Many have committed suicide.

So get your facts straight!

Your baseless assumptions are miles off the mark and incredibly offensive

I was a self employed contractor paying the same tax as a PAYE person for years. I used an umbrella company who ensure the tax is correctly payed. All 100% above board. There was also very little that could be claimed as expenses, I do agree in years gone by there were loop holes and some people took advantage.
I don’t get a pension or holidays paid. TJ, we’re you not on reduced duties for a while? That’s not an option for me, I’d lose the contract. My friend is an NHS doctor, her daughter has had issues which have resulted in my friend being on long term sick (her pay has remained unchanged), so far she been off since the end of December. I would lose my contract with no pay. Are you not getting ready to retire on your NHS pension soon? I don't get a company pension.
I don’t class those as perks by the way, just differences between our employment contracts.
Threads like this are just pointless tbh. Too many people looking down from their ivory towers with no real knowledge of each others individual circumstances.

Doomanic - for the simple reason that if you pay tax on income as it’s earned rather than when it’s paid and then have months without any work you then have no means to sustain yourself other than benefits - it’s called cashflow . This is exactly the position millions have been stuck in over the last year.

Why should small companies be treated more harshly than big ones?

I paid per month £820 tax ni and superannunation ( £200 effectivly a tax but one that gets me a small pension) on a gross income of £2350

Are you counting your pension as a tax here? On 28200 a year, you should only be paying 450 quid tax and ni a month?

A bit off no, to be claiming that a tax?

Tax year:
2020-21
Enter your current salary: 28200 (12 x 2350)

Your results
Over the year, you'll pay £3,152.06 income tax and £2,244 National Insurance.

Your monthly income before tax is £2,350.

Your take home pay is £1,900.33.

@doomanic in my line of business it was never my choice to remain as a contractor. It was purely down to circumstance. Before children I had no need to work full time. I contracted for 6 to 9 months then would take a period of time off. This happened for 4 or 5 years. I applied for permanent positions but as I had a background of contracting I ended up stuck in that cycle. Managed to break the cycle eventually and took a permanent role, with a large finance company. Pretty much every week if felt like they were restructuring and the job felt less secure than a contract. Lasted it for 3 years before finally had enough and went back contracting.

£220 in superannuation £430 in tax, 180 in NI. thats a direct read off my payslip. My earnings did vary month by month so that effects tax but that was a low wage month.

I find it crazy you know this, I haven’t a scooby what my mates pay in tax. 😆 Couldn’t care less either.

He was whinging about not getting any sick pay because he only pays the lowest NI IIRC. so i went thru some numbers with him to show he wasn't getting ripped off and that he paid less than 1/10th the tax and NI I did

Well don't blame us cause your mate is a dodgy character. 😆

Every self employed person I know does this

Binners - lets take your laptop. did you claim it 100% against tax? Is it only used for paid work?

Exactly! Don’t lump us all in with the tax-dodgers you choose to knock about with

Every self employed person I know does this

You know me and I don’t do this.

I do everything straight down the line, and look where it’s bloody got me over the last 12 months? As far as the government is concerned, I don’t exist

You think being self-employed is cushy? You try the life me and 3.5 million others have had since last March.

Why not have a read about what a bloody great time we’ve all been having

https://www.excludeduk.org/excluded-uk-an-inclusive-alliance-for-the-excluded

Frankly, you don’t know how ****ing cushy you’ve got it

TJ it’s frankly a bit rich to complain about other people “whinging” when your own NHS pension scheme has guaranteed benefits that are simply unavailable to most of the people reading this thread.

As an example - NHS employees continue to enjoy an index linked defined benefit scheme that can rise to a maximum pension pot of £2m before it attracts extra tax. Everyone else can only non index linked money purchase schemes and gets clobbered for tax at £1m.

TJ I’m willing to send you my payslip. You will be very surprised at the amount of tax contractors pay.
All you would need to do is to apologise to people like binners and myself who believe in paying our tax.

cheddarchallenged
Full Member
TJ it’s frankly a bit rich to complain about other people “whinging” when your own NHS pension scheme has guaranteed benefits that are simply unavailable to most of the people reading this thread.

shh that pension is a tax don't ye know...

£200 effectivly a tax but one that gets me a small pension

Superannuation isn't a tax so stop pretending it is, it comes off before gross which is a tax and NI benefit. One of those loopholes you don't like.

Binners - I agree you have been shafted on support thru covid. Did you see my question about your laptop thio - 100% claimed against tax or only part as you use it outside of work? I did try once being slf employed - hated it

Cheddar - its a part of the reason I took the job and a part of the reason I accepted a lower salery. My "gold plated" pension is £500 a month

Superann is nothing to do with this really

Superann is nothing to do with this really

why did you include it to make yourself look hard done by then? Plus it is, cause you are also using a tax loop hole as mentioned above.

100% claimed against tax or only part as you use it outside of work?

I can claim back the VAT I paid on it.

Do you realise how unbelievably tactless and offensive you’re coming across as to those of us who’ve had the year from hell, with no end and not a penny of government support in sight? People in my position have taken their own lives in despair. I’ve been one of the luckiest ones and I know and appreciate that

Can I take this opportunity to personally thank the many people off here who commissioned work off me. God knows where me and my family would be without that. It’s kept us afloat when most of my industry has ceased to function and we have been completely abandoned by the government

£220 in superannuation £430 in tax, 180 in NI.

Tax/NI figures just don't fly. (£430 tax =~ £290 NI)

Pension contributions are clearly not a tax.

TJ I’m willing to send you my payslip. You will be very surprised at the amount of tax contractors pay.
All you would need to do is to apologise to people like binners and myself who believe in paying our tax.

If yo are not claiming every little thing possible I am suprised - everyone I know does.
I know Binners is a decent sort and would not unduly fiddle - sorry dude I don't know yo but I will take your word on it so if apologies are in order then i am happy to do so

I think many of you would be suprised how much tax and NI PAYE folk pay.

It would appear my question touched a nerve which wasn't my intention, so I apologise for that. We had contractors at work (project managers) who were not prepared to go PAYE and I was wondering why they would do that.

Yip, 3 months with zero earnings earlier in the year, and 4 months currently with seriously hampered earnings. And zero help. Still had to chuck a wad to HMRC the other week.

Apologies then Binners. Not intended to be offensive

Tax/NI figures just don’t fly.

Read directly from a payslip as above I think many of you that are not paye would be suprised how much tax and NI we pay

I think many of you would be suprised how much tax and NI PAYE folk pay.

How many ****ing times?

I wouldn’t be surprised because I pay EXACTLY THE SAME!

You pay the full NI binners not the class whatever tiny amount?

Read directly from a payslip as above I think many of you that are not paye would be suprised how much tax and NI we pay

I'm PAYE, but moreover, I can use a calculator.

Superannuation is just not a tax. It is the equivalent of the contributions the self-employed (or those employed by their own service company) have to make to their DC pension fund. And bear in mind that those contributions are not matched by any equivalent actual or quasi (in the case of a DB pension) contributions from their employer. That doesn't mean the employed are axiomatically "better off" than the self-employed, simply that the self-employed need to bear that additional cost in mind when deciding what they need to charge their clients. And ultimately whether being self-employed is the right choice for them.
I have simply no concept of how someone generating a self-employed income equivalent to yours can possibly be paying 10% of the tax you are paying, other than via fraud. The difference between NIC for the employed and self-employed is not huge, being 12% vs 9%, unless your mate is already making NIC payments from another job.

I ask because thats what one of my self employed mates does. He drives for work as a freelancer. But he claimed for 2 cars and a motorcycle to be offset against tax plus his lockup and other stuff with at best only peripheral relationships to his work

Surely that's fraud? Why haven't you reported him to HMRC for tax evasion?

You pay the full NI binners not the class whatever tiny amount?

Yes, he does, it's been explained elsewhere hence his anomalous status that means he gets **** all for furlough.

I have simply no concept of how someone generating a self-employed income equivalent to yours can possibly be paying 10% of the tax you are paying, other than via fraud.

It helps if you start from a position of thinking you pay about double as much tax for your salary as you ought to.

Ta for that Squirrelking - its utter shite how self employed have been dealt with thru this - you have no argument from me. and again - If I have clumsily upset people then I apologise

I have simply no concept of how someone generating a self-employed income equivalent to yours can possibly be paying 10% of the tax you are paying, other than via fraud.

Creative accounting / tax avoidence / creative accountant

It helps if you start from a position of thinking you pay about double as much tax for your salary as you ought to.

If thats a dig at me I READ THE NUMBERS DIRECTLY OFF A PAYSLIP

Small point of order, but the NHS pension is subject to the same 1.07 million limit as all other pensions, not 2 million as claimed above.

https://www.bma.org.uk/pay-and-contracts/pensions/tax/nhs-pension-lifetime-allowance

“Binners – lets take your laptop. did you claim it 100% against tax? Is it only used for paid work?“

Are you also saying that the hundreds of thousands of NHS staff who have mobiles provided for them never make personal calls on them?

TJ I thought you would know the tax rates anyhow, do you not have to pay tax on earnings from being a landlord?

TJagain; are thinking about self-employed/contractors who operate as directors of limited companies and then pay themselves a minuscule salary (below the tax threshold), plus one for their partner/husband/wife then claim dividends?

My brother in law does this. My sister is an “employee”. He earns about £100k as a CAD contractor but they pay a tiny amount of tax etc. My knob of a sister even claims child benefits for their kids, which she could (should) opt out of.

My wife is self employed. Does everything decently and fairly like binners. She couldn’t work because of COVID (she didn’t get it!) and she’s received virtually no government support.
I’m a bog standard employee who kept working fortunately, so we’ve been so lucky compared to many these past 12 months.

Mrs TJ does that ( pays the tax on the rental)

There are plenty of people who avoid tax, self employed and employed, but to assume everyone is at it is baseless.
I’m self employed, and pay everything that I should, my accountant is straight down the middle. I could claim for more possibly but those things would be tenuous so I don’t. I know people who do and I have little time for them.
I’d never encourage anyone to be self employed. I generally have one bad debt a year. This year it was about 2,500. A couple of years ago I lost £11,000 and the worst a few years before that £25,000. I’m lucky that I have survived those but I’ve had to work bloody hard to get past it.

If thats a dig at me I READ THE NUMBERS DIRECTLY OFF A PAYSLIP

Sure, but they don't add up.

£2350 gross.

£12500 / 12 personal allowance.

Taxable salary: 2350-(12500/12) = 1308.33 (Ignoring superannuation, which would reduce the taxable amount).

20% of that: £261.67

tjagain
Full Member
Mrs TJ does that

nice wee loop hole that. 😆

so many misunderstandings about how hourly paid contracts get paid I think is the main problem here.

People can work on a contract and work PAYE. Or through an umbrella company PAYE (waste of time as far as I am concerned, unless you do regular short contracts and want to show continuity of employment for a mortgage etc.) or work through a personal services company (ltd)

It's those working through a ltd company who defeintly pay less tax, if they don't why are they all trying hard to argue against IR35 decisions eh? 10% minimum less income most say if they go PAYE.

Its especially relevant when you get above the 40% income - vs corporation tax/dividends..

Even when taking into account accountancy fees, anyone on 600 per day would take home about 15k more limited than PAYE - just check any online calculator and that is being tight with business expenses.

Aidy - I just went and looked at another payslip - that onbe was a year when i got emergency taxed for a a year

another later payslip when I got my tax code sorted is in line with your calculations!

trust me to pick up a payslip which was not correct on tax rates! 🙂

Reading through the thread, the main issue as I see it is that as a self employed person you are very much left to fend for yourself, leading to the mercenary mindset mentioned above.

The tax savings are really pretty minimal unless you are really up there paying yourself £50K + dividends. That's simply not reality for the vast majority of SE people.

Perks? How about sickpay for a start?
TJ, lets say you have a cardiac arrest tomorrow, brought about by perusing a dodgy tax return.
It's nasty, you are off work for three months, and then back to work on light duties for a further three months. How much money do you take home over that period?
Call up an insurance company and enquire about getting insured to that level as a SE person. Please report back on your findings.....

As a slight diversion, I sometimes wonder who does best out of the system over a lifetime of work, discounting the top few percent of trough snufflers.
I did work for a chap recently, ex navy air fleet commander. Pay tax on your large salary for 25 or so years, retire early fifties, draw a mahoosive pension for potentially 40 years.
I think he's doing better over a lifetime than any SE person saving a few percent on NI contributions.

To put the last year into perspective of what life has been like for the self-employed for the last 12 months:

The government keeps trotting out the figure that it has ‘put its arms around’ 1.6 million self-employed people.

The trouble is that there are 5.2 million self-employed in this country

You do the maths. That’s how many people have been cut adrift without a penny of government help as their incomes went into freefall. Those people, with the odd exception, will have paid all their taxes in exactly the same way any employed person would.

In March last year Rishi Sunak made a conscious decision that we were acceptable collateral damage

So we can do without the accusations of being freeloading tax-dodging fraudsters, thanks very much

I have apologised for the slur Binbins

But you have to understand that the government has been able to throw the self-employed to the wolves because of the baseless myths that you’re perpetuating in this thread

They’re all tax-dodgers aren’t they? So why should they get any government support?

Well, no. We’re not tax-dodgers. We pay exactly the same as you, but we’re entitled to nothing. Not a penny of government support. No furlough schemes for us. We’re on our own

Bedmaker - in the NHS I would get full pay

In a previous job in the private sector SSP only

NHS terms and conditions are worth about 20 - 25% of salary compared to private sector. But then we are paid a lot less in the public sector.

@stevemuzzy, last two contracts I had we only had the option of umbrella PAYE, well the other option was to keep looking for work elsewhere.
Umbrella is a horrible option though as I have a sneaky suspicion that one of the “tax” payments I had to make went to the Umbrella Company. Called Employer Statutory Costs, £300 a week. But if
I work I have to pay it. (They have explained it but I’m not convinced it all goes to the taxman)

when you’re at work, have you paid for the laptop you’re working on, the software licenses it’s running? Are you paying to heat the building you’re in? Did you buy the chair you’re sat on? The desk you’re leaning on?

All of this, for most of the last year, yes.

last two contracts I had we only had the option of umbrella PAYE, well the other option was to keep looking for work elsewhere.

Its the standard default in a lot of industries