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So much nuance gets lost when commenting on an internet discussion. Like the key use of the word “some”, which is immediately turned into an attack on “all”.
Exactly how my posts were taken
Well said everyone. Group hug, sanity reigns.
Trying to steer it back, what would we like to see?
Jeff Bezos and his ilk putting their hands in their pockets and paying what they're due?
I'll wager he's done very nicely out of this and if just Amazon paid all the tax they'd properly be due then that'd cover a big chunk of what the ordinary working joe contributes.
Never gonna happen though because late stage capitalism.
Best get used to that.Any dreams of a cashless society will be going right out of the window. As furlough ends and the real recession hits, cash is about to be making a bigger comeback than vinyl.
With all the implications for tax take
Exactly the loss of tax take at this level is massive.
Percys spot on the big businesses only pay a fraction percentage wise that an individual or an SME pays in tax. If these organisations (Boots INEOS are other examples) actually paid the going rate non of this would be an issue.
But on here we debate the moral position of an an SME Director paying a few percentage points less in tax than a Full PAYE employee from a business they have risked money, time and sometimes their home in.
I also don't begrudge @tjagain and the rest of the public sector their pensions either 🙂 We all make different choices, I made one choice and for the most part I am happy with it. The fact I can't buy one is just the luck of the draw, you win some you lose some. I have loved ones who are teachers/police etc and I do sympathise with the rules changing.
Id rather we all were allowed a decent retirement, rather than pulling people down to my level where I will be enjoying the stress free permie life in B&Q when I am no longer relevant in my industry, 70 and can't afford to stop work 🙂 Thats not a dig at B&Q by the way 🙂 Just that I actually know a bit about tools, so think they might employ me 🙂
Exactly the loss of tax take at this level is massive.
Is it really though?
I'm not convinced that cash will make a comeback, I suspect people will continue to enjoy the convenience of cashless transactions.
I would suspect that the cash only people are probably the lowest paid who pay very litte direct taxes anyway and would probably qualify for tax credits etc. Indirect taxes eg alcohol / fags will still be paid via shops.
PAYE / Income tax is mainly paid by the well off eg Top 1% of earners in UK account for more than a third of income tax.
Thats not a dig at B&Q by the way 🙂 Just that I actually know a bit about tools, so think they might employ me
I know quite a few people who are looking forward to a bit of retirement part time work at B&Q!
But on here we debate the moral position of an an SME Director paying a few percentage points less in tax than a Full PAYE employee from a business they have risked money, time and sometimes their home in.
Well as a director / share holder they probably earn more, so if they paid the same % they would still take home more. If we're talking moral positions surely we should pay as we can afford and recieve as we need.
Just to give another example of the reality of self-employment during the pandemic, I was talking to another PAYE freelance designer yesterday. Up until last March we worth both really busy. She hasn't had a single days work since the industry effectively shut down last March. She also hasn't had a single penny in government support, as like so many of us self-employed people we are excluded from all government schemes
We are Schrodinger's taxpayers. Neither employed nor self-employed according to Rishi, so we get nothing.
Can't be bothered to read 5 pages of crap on this subject. Being Self Employed is bloody hard work.
-You break your ankle - 8 weeks off work.
-Your kid needs to be cared for - you lose a day's pay
-No pension scheme.
-No employment rights. Your customers can just tell you to piss off from one day to the next.
-Endless cost of tools, vehicles, insurance, post-modern need for compliance, certificates, registration, certificates, red tape, companies house and accountant fees.
All the above comes at a huge huge cost. The reason lots of self employed people don't pay very much tax, is because they are kidding themselves about how much they actually earn.
They see reasonable amounts of money ebbing and flowing in their account and estimate they are earning far more than they are.
There will be the idiots on here who say "well, you have to price those things into your business then don't you?", but in reality the world doesn't really work like that.
Being self employed is a hugely risky business. There are limited tax benefits to be had at the moment, but they are extremely limited and you are constantly exposed to the risk of illness/injury and the whims of the market.
My self employed mantras are:
Turnover is vanity, profit is sanity
and
Work smarter, not harder.
Actually interested in what you industry work in?
I work in offshore oil and gas where to be totally honest setting up a Ltd company was seen by a lot of Engineering staff as a way to simply pay less tax (Well NI normally) but plenty of people also "paid" their spouse a wage despite them not actually doing a job for the company. It was also allowed because there were often times that there would be a significant shortage of engineering staff to complete the work which helped to drive the culture. There are other more Admin type staff for whom contract working was the only real option so it's not universal in the industry but is for the disciplines. It basically these sort of set ups that IR35 was designed for and to be brutally honest the sense of entitlement that some have is pretty appalling.
Its actually dawned on me recently that now I've got a part time job to replace the gigs that I've lost, I don't really have any 'work stress' in my life. I mean obviously there's the lack of motivation to go and do a mundane job 2 or 3 times per week, but I'm not constantly looking at the diary working how many gigs or month I've got booked in for the next 6 months etc.
Previously I'd definitely have been lying awake at night a couple of times per week worrying that my career was going downhill because I'd not got enough gigs in the diary etc.
Good mate of mine is a Sat diver and I thought there were particular tax laws to cover you guys? Sort of some weird in between PAYE and self employed ?
I am sure he gets taxed a source, but does not get paid when hes not working etc.
I work in electronics and firmware design and I have seen people let go after 2 days if they are no good or don't fit in. There are some longer engagements but you tend to have to be good. Its a weird scenario you are good and clients like you so they give you repeat work then people then say its disguised employment. If you are crap and are forced to never darken the same door twice its not 🙂
if just Amazon paid all the tax they’d properly be due
They do - they pay thier corporation tax in the correct place just as wine producers pay their corporation tax in the correct place which isn't were they sell their product.
Yes, we need to hammer online sellers to protect our bricks and mortar businesses but that needs to happen via a whopping sales tax - higher rate of VAT on online sales, there is no other way. (And people who claim other ways are just using different words that mean sales tax.)
Good mate of mine is a Sat diver and I thought there were particular tax laws to cover you guys
Divers might be under different rules, I'm not sure. I'm talking about onshore based staff where it is fairly obvious to any reasonable person that it is disguised employment. Sat at the same desk, doing the same sort of work for years on end, perhaps moving from project to project and to be honest there isn't really that much difference in terms of security. About three weeks to be honest.
They do – they pay thier corporation tax in the correct place just as wine producers pay their corporation tax in the correct place which isn’t were they sell their product.
Fairly dubious they were, is the 'correct' place for UK sales to be taxed really Dublin?
They were routing all their UK sales via Dublin as the tax rate was lower there.
Even worse, until recently US companies reporting sales in Ireland managed to avoid any tax, falling between two different systems.
100% legal but morally indefensible.
100% legal
Yup, and nobody can think of suitable laws to change it.
Which is where sales taxes come in. Impossible to avoid legally and specifically designed to gather revenue in the place the transactions are made.
There will be the idiots on here who say “well, you have to price those things into your business then don’t you?”, but in reality the world doesn’t really work like that.
It does for me, my industry works on the basis that freelancers are all on PAYE.
Pisses me off that it's meant that a portion of my friends are furlough on 80%. And others are pissing and moaning about being contractors and getting nothing (shouldn't have spent that NI saving on a nice car and bought a £650 Berlingo like me then).
You've not been "forgotten", you should have paid yourself in a less tax efficient manner that actually reflected your earnings if you wanted the benefits of things like furlough.
Those of us on PAYE "contracts" on the other hand have actually been shafted because we were never incentivised (or given the NI break) to budget for a year off work.
Yup, and nobody can think of suitable laws to change it.
simple to do so with the political will. Turnover taxes, outlaw exporting of profits usually disguised as franchise payments or similar
There is no political will in the UK to do so
Those of us on PAYE “contracts” on the other hand have actually been shafted because we were never incentivised (or given the NI break) to budget for a year off work.
Yip. We've got the worst of both worlds. We've been bent over and they've gone in dry. And absolutely nobody appears to give a flying ****.
When it first happened I thought that there had obviously been some kind of oversight and there would be some adjustment. 11 months later I'm amazed at how naive and hopelessly optimistic that was of me. Nobody cares. We're invisible.
There are entire industries where PAYE freelancing is the standard. Or there used to be. I doubt there will be much left now
simple to do so with the political will. Turnover taxes, outlaw exporting of profits usually disguised as franchise payments or similar
There is no political will in the UK to do so
A turnover tax is just a proxy for a sales tax - unless you're saying you want to tax on turnover generated abroad.
Got a link detailing your other idea in detail. (Preferably with an example of somewhere it is implemented and working.)
Pisses me off that it’s meant that a portion of my friends are furlough on 80%. And others are pissing and moaning about being contractors and getting nothing (shouldn’t have spent that NI saving on a nice car and bought a £650 Berlingo like me then).
Spot on I agree with this, you are either self employed or you are not, you can't pick and choose the bits you like and the bits you don't.
Those of us on PAYE “contracts” on the other hand have actually been shafted because we were never incentivised (or given the NI break) to budget for a year off work.
I am not honestly not Trying to be a dick, but why do you do it? Why take a position that is the worst of both worlds. Genuinely interested in the reasons.
I am not honestly not Trying to be a dick, but why do you do it? Why take a position that is the worst of both worlds. Genuinely interested in the reasons.
We weren't aware that we were going to get the worst of both worlds until March last year. We foolishy assumed that as we payed our tax and NI in the same way as any employee that we (quite rightly) would enjoy the same benefits
Well, that went well. What is they say about assumption being the mother of all...
As for why we do it... we're in jobs where we move from one project to another all the time. I might be on one job for a week, then the next one for a month, the next for 2 weeks. I might be juggling 3-4 jobs for different clients at any one time. So putting everything through an umbrella company and just paying all your tax and NI as PAYE basis on all that different income is just less bother for everyone involved.
Thats why its just the default form of employment in industries where people move around a lot.
We have been well and truly *ed over, big time! And we're *ing livid!!!
Final salary is one type of DB (defined benefit), main other type is career average but any pension scheme where you know what you’re going to receive post retirement is a defined benefit.
DC (defined contribution) is where you know what’s paid in (x% of salary) but have no idea until the day you retire what you will be receiving post retirement.
Er, no, DB is final salary and DC is career average (since its based on the average contribution).
https://www.pensionbee.com/pensions-explained/pension-types/what-is-a-defined-benefit-pension
Yes, we need to hammer online sellers to protect our bricks and mortar businesses but that needs to happen via a whopping sales tax – higher rate of VAT on online sales, there is no other way. (And people who claim other ways are just using different words that mean sales tax.)
So essentially you want to punish big business by hammering consumers with a regressive tax? That sounds well thought out.
@binners will your clients only engage you on a PAYE basis or is it a choice?
I am talking historically, obviously now the landscape is somewhat different with IR35
Is it really though?
This is a business so the tax will be on corporation tax, owners income (dividend or PAYE) so likely to falsely post a lower income. Both of these add up to a fair amount.
might be on one job for a week, then the next one for a month, I might be juggling 3-4 jobs for different clients at any one time.
That describes my working. Never felt the need to use an umbrella company. I did have one client request it and I turned the job down. As bazzer, not trying to be a dick, just want to understand why you would choose it. That sort of working describes builders, plumbers, etc. In fact pretty much anything I would call "proper" self employed rather than disguised employee.
Er, no, DB is final salary and DC is career average (since its based on the average contribution).
Er no DC is a tax efficient way of saving a pot of money that you swap for an annuity when you retire. Nothing to do with your career average pay. Purely down to the size of the pot and how good deal the annuity you buy at retirement time.
@binners will your clients only engage you on a PAYE basis or is it a choice?
Someone mentioned earlier in the thread that its so common (because its so much less hassle for everyone involved from an admin standpoint) that its just whats expected. Employers will insist on it as its just easier. It's just the way things have always been done for decades.
What we didn't know (and why would we?) was that it was going to end up as a stick to beat us with
The irony of all this it's that the self-employed who most definitely haven't been involved in 'creative accountancy' to pay lower levels of tax are the ones who've been left out in the cold.
Go figure. We can't.
So essentially you want to punish big business by hammering consumers with a regressive tax? That sounds well thought out.
There is no way of taxing a company's activity that isn't regressive. At whatever point in the chain you take the tax there's no way to relate it to the spending power of the people who bought the original product or services.
I don't want to punish big business. I think there's a case for online sellers to take on some of the massive tax burden bricks and mortar businesses currently bear. Also, in recent years, I'm a bit of a protectionist on the quiet. (Yes, I know.) Business rates are also regressive - I don't get 2pc off in halfords if I'm poor, my cash goes into the same big pot that all the other customers pay into that Halfords use to pay their rates etc I pay the same portion of Halfords business rates as Bill Gates does if he's standing beside me buying the same copper grease as me. (I know for a fact we both use the same copper grease.)
I am not honestly not Trying to be a dick, but why do you do it? Why take a position that is the worst of both worlds. Genuinely interested in the reasons.
Mine is a bit different to Binners.
I'm on PAYE directly from the client, but don't get any other employment perks like a pension, holiday or sick pay. Some companies add accured holiday at the end of the job, others just round up the day rate to reflect it.
It's just the way the (TV production) industry works. No one needs a camera technician when they're not filming so you go from job to job.
Why do it? Those are the terms, take them or go work in a different industry.
No-one ever hinted that everyone except us would be furloughed (yes even you guys in Ltd companies can claim 80% of minimum wage or whatever you told HMRC you earnt). There's no self employed grant for us. No zero interest bounce back loan, sweet F*** all is what we all got. Yet we're going to have to pay it back just like everyone else come budget time 🤷♂️
Er, no, DB is final salary and DC is career average (since its based on the average contribution).
https://www.pensionbee.com/pensions-explained/pension-types/what-is-a-defined-benefit-pension
/blockquote>Your link literally disagrees with you:
"[defined benefit pension is based on] Your salary while working: sometimes your final salary, or sometimes an average of your salary over your career"
It's a defined benefit, because it tells you what you get out.
Defined contribution only specifies what you put in, if the pension fund crashes, you could get nothing out.
others just round up the day rate to reflect it.
I thought that was illegal?
For those of us living in scotland(might be worth having a gander about your council or gov website if you like elsewhere,), a couple of funds opened up this week that may be of interest. I've applied who knows if I'll get approved or not, but we'll see.
From the scottish gov and your council:
Local Authority Discretionary Fund: (Through the council)
https://www.southlanarkshire.gov.uk/discretionary-business-fund
Newly self employed hardship fund: (Scottish gov administering this time, criteria seems to have been widened..)
https://findbusinesssupport.gov.scot/service/funding/newly-self-employed-hardship-fund
You might find more help for other things if you look on here.
Anyhoo, who knows if they'll once again knock me back. Hopeful on the second one, as they seem to acknowledge the discrepancy that meant people like myself were excluded from both SEISS and the last newly self employed grant they dished out. (ie started self employment before april 2019.)
But we'll see what happens. Will do no harm to apply anyhow. All they can say is naw.
They seem to be on a first come first service basis btw. (Assuming they deem you eligible.)
Yup, and nobody can think of suitable laws to change it.
The law bit is easy it's getting all countries to agree to it as offshoring profits is just a game of whack-a-mole with companies shifting to the next cheapest jurisdiction.
It’s just the way the (TV production) industry works.
And that’s because HMRC singled out production companies for regulation because they thought there was scope for fraud/under reporting of income.
So now only heads of department are self employed (DOP/Director etc) anyone with assistant in their job title is PAYE.
I do a small amount of work in the industry but not much. Was surprised to be asked for my tax details on invoicing, especially as I’m a director (company) and vat registered.
Sorted that by giving me a different job title on the call sheet.
I feel for those in the industry, singled out for special treatment by HMRC and then often in no man’s land for help.
I have to say that a lot of those salaried posting in this thread really have no idea what its like to run a business, do you really think we are all driving Jaguars, getting fitted for suits and practicing golf swings in the office?
Couldn’t be further from the truth.
And that’s because HMRC singled out production companies for regulation because they thought there was scope for fraud/under reporting of income.
Would have thought a CIS alike scheme would have been an easier way to ensure that gets caprtured.
What this thread needs is more people in secure, salaried jobs-for-life, with gold-plated, ring-fenced, triple-locked pensions moaning and whinging about how life is so unfair and how so hard done by they are
Everyone who’s been recently ****ed over really wants to listen to a discussion about the relative merits of benefits and pension schemes that are so laughably unavailable to them they might as well be based on the moon.
Apparently the triple-locked crowd are the real ‘victims’ here
Let’s all take a moment and get our tiny violins out to mourn for the hardships they’ve been so unfairly forced to endure
Your link literally disagrees with you:
FFS it also appears to contradict itself.
What is a defined benefit pension?
A defined benefit pension (also called a 'final salary' pension) is a type of workplace pension that pays you a retirement income based on your salary and the number of years you’ve worked for the employer, rather than the amount of money you’ve contributed to the pension.
That's what it says before going on to contradict itself.
We have/had a totally different DC setup based on career average earnings but is underwritten by the company so this investment performance question doesn't apply. Older scheme is final salary DB with similar underwriting.
So you can see why I'm confused.
@binners the pension thing is an aside, literally nobody is claiming to be hard done by here. No ****ing idea where you got that from.
As for triple locked gold plated jobs for life, you couldn't be further from the truth.
There seem to be a few people here, as far removed from the reality of self-employment as it’s possible to get, who appear to think they’re very hard done by.
I’ve said it before, but it absolutely *s me right off people in nice, cosy steady jobs with guaranteed income and benefits implying that we’re all tax-dodgers and fraudsters
They don’t know they’re *ing born
Self-employment or zero hours contracts is increasingly the only option available for employment, and is about to become more so.
So the 1980’s mindset that people are doing it to avoid tax is both tedious and insulting
Can't argue with that.
My father and sister in law are both self employed, if they hadn't got grants they'd have been screwed.
What happened to you should never have been allowed to happen, it's utterly rotten.
I am approaching 2 years of self employment, but completely invisible to furlough schemes. My girlfriend is zero hours at a school so no work during school lockdowns. Both our jobs have shifted from traditional secure PAYE jobs as a direct result of government policy or more likely inaction.
The idea that the self employed should be targeted to 'pay back' is completely deluded, most will not be able to.
Whichever side of the argument you are on, if you think the public sector or the self employed have it so much better than you, why don't you give up what you've got and go and do the other?
Otherwise, we're all just pissing in the wind.
Whichever side of the argument you are on, if you think the public sector or the self employed have it so much better than you, why don’t you give up what you’ve got and go and do the other?
Otherwise, we’re all just pissing in the wind.
+1 to that 🙂
Binners, I hate to have to say this but you are so far from correct that it's difficult to know how to help you straighten this out. I'm in a position where I am exposed to and deal with this issue every day. Most of the SE folk I see are paying an average of about 20-30% of the tax liability of the employed on similar levels of earnings. Please stop arguing; you may be paying your fair share but you are not representative of the general population and most do not. Many SE pay little or none at all, artificially reducing their 'profits' to the point where any liability to a proper tax bill has evaporated.
Same applies to the company cases; most people set up their own small companies to avoid tax. It's that simple. It doesn't work as well now as it used to as a few gaps have closed but still, the lack of Covid support aside for now, the net position is less tax liability overall.
In general, TJ's experience is mostly correct and reflects the reality of life in the UK. Some self-employed folk whose accounts I see do pay their fair share. A great many do not, from small abuses of the system through to significant and deliberate fraud.
Most of the SE folk I see are paying an average of about 20-30% of the tax liability of the employed on similar levels of earnings.
Curious. Could you post up a couple of worked examples please?
It's very simple; under-stated earnings, over stated expenses, deductions and allowances. Low taxable profits. Job done.
I respect those who do this right and choose to pay the correct tax liability. However, so few people do that it saddens me plenty.
Most of the SE folk I see are paying an average of about 20-30% of the tax liability of the employed on similar levels of earnings.
not possible unless they (the self employed) are committing fraud, or they are piling much more into their pension than the paye person who they are being compared to - an option which is also available to anyone on PAYE to reduce their overall tax burden
I’m a bit stupid. Please explain under stated earnings.
Vinny, and anybody interested
https://www.contracteye.co.uk/directors_salary_contractors.shtml
There is a tax calculator at the end.
1 - do it as a proper employee (so 100% salary, 0% dividend)
2 - do it as a director/employee (1 man band, ltd co), so say a salary of £9000 and then everything else as dividends. (Or £12,500 salary)
Assess the difference in tax and NI totals paid. (*IT Type pay would be say between £250 - £600 a day and if lucky you could do it all year)
3 - consider the impact on option 2 of , having a stay at home wife who does nothing, sorry, earns 12500 as she **works** for the company.
It’s very simple; under-stated earnings, over stated expenses, deductions and allowances. Low taxable profits. Job done.
fraud then - just need to apply the existing laws to sort these out
Vinny, and anybody interested
https://www.contracteye.co.uk/directors_salary_contractors.shtml
There is a tax calculator at the end.
1 – do it as a proper employee (so 100% salary, 0% dividend)
2 – do it as a director/employee (1 man band, ltd co), so say a salary of £9000 and then everything else as dividends. (Or £12,500 salary)
Assess the difference in tax and NI totals paid. (*IT Type pay would be say between £250 – £600 a day and if lucky you could do it all year)
3 – consider the impact on option 2 of , having a stay at home wife who does nothing, sorry, earns 12500 as she **works** for the company.
Elephant in the room is that those dividends are from profits, which have already had CT applied. Calcs look a lot different after that.
Besides which, none of the above applies to self employed.
fraud then – just need to apply the existing laws to sort these out
Yes, some of it is. It's also very hard to prove in terms of time and resources available. Some of it is legal tax avoidance, and loopholes should be closed.
I'd dispute "most" are doing it, I'd say "some" are doing it.
Mind you, HMRC are recruiting compliance officers again I see this morning, so if you fancy switching to a cushy public sector job, enjoying the perks and whopping pension benefits, and putting your money where your mouth is, head on over to the Civil Service Jobs website.
'Understated earnings':
"..Well, that job was for a mate, so that's not earnings. This one was for my cousin, so that doesn't count either. I got paid for one by the taxi firm down the road, although it was for the owner himself. They paid cash, so it doesn't go in my books either. I used the cash to sub contract another job out and made a tidy margin on that too.
The IT firm in the next town wanted work done but for some reason they didn't want an invoice and they suggested I be paid by bank transfer into my wife's account.
I don't like paying tax to those Westminster pillocks to waste on their chums' contracts, so I keep a second bank account off record and put 1 in every 4 payments in there. My accountant doesn't know about the other bank account, I use it for the wife's car, for holidays and to pay the mortgage on the apartment in Benidorm. I don't pay my accountant enough for them to ask any questions and that works just fine.."
Right, I'm out.
Most of the SE folk I see are paying an average of about 20-30% of the tax liability of the employed on similar levels of earnings. Please stop arguing; you may be paying your fair share but you are not representative of the general population and most do not.
Can I have their accountants details please, the idea of paying 20-30% tax of a PAYE salary sounds great.
My accountant sees my bank statements and vat returns and picks out transactions to ask me exactly what they were for, some self employed friends have the same accountant so would probably be interested too.
After chewing through my savings over tbe last year to pay my mortgage I could do with some payback seeing as I have paid tax like a good boy for 20 odd years.
Elephant in the room is that those dividends are from profits, which have already had CT applied. Calcs look a lot different after that.
Besides which, none of the above applies to self employed.
yep - its not showing the 19% corp tax which is due on the profits which the dividends are taken from.
If you have a salary of £12500 and pay yourself £50k in dividends , then the tax that you (as in you personally , not the company) pay on those dividends is £6725, but before those dividends even reach you the company will have paid approx £12000 corporation tax on the profit that allowed them to be paid, so a total tax burden on those dividends of £18725
@highlandman do you really think that is how all ltd company directors behave? How do you think the b2b clients I work for would react if I asked for payment in cash or into a non company registered account?
‘Understated earnings’:
“..Well, that job was for a mate, so that’s not earnings. This one was for my cousin, so that doesn’t count either. I got paid for one by the taxi firm down the road, although it was for the owner himself. They paid cash, so it doesn’t go in my books either. I used the cash to sub contract another job out and made a tidy margin on that too.
The IT firm in the next town wanted work done but for some reason they didn’t want an invoice and they suggested I be paid by bank transfer into my wife’s account.
I don’t like paying tax to those Westminster pillocks to waste on their chums’ contracts, so I keep a second bank account off record and put 1 in every 4 payments in there. My accountant doesn’t know about the other bank account, I use it for the wife’s car, for holidays and to pay the mortgage on the apartment in Benidorm. I don’t pay my accountant enough for them to ask any questions and that works just fine..”
Right, I’m out.
But above, you made an assertion, and hence alluded to knowing turnovers (declared and undeclared), costs, personal incomes, and personal taxations etc etc. Still haven't seen any worked examples.
Deleted
It’s very simple; under-stated earnings, over stated expenses, deductions and allowances. Low taxable profits. Job done.
I'd imagine that you're maybe looking at fraud cases then? In which case you use the existing law to prosecute and recover the correct tax.
Profits are taxed under the relevant corporation tax rate. Any dividends are then paid from the net profit, and then income taxes paid on the dividend by the individual. I assume your "20-30%" claim includes all of that?
The system allows 1 person Ltd companies. It's a legal precedent that people can minimise their tax exposure (within the bounds of the law).
If you don't like that, lobby your MP for a tax system that's fairer for all.
FWIW, I support people paying their taxes to provide the public services that people expect and rely on.
I'm a Scottish higher rate tax payer, so pay more tax than an identical English counterpart. I'm happy with that.
Full discloseure: I formally operated as a 1 person Ltd co. It was the only way I could get work in my industry.
There's one reason large companies use so many 1 person Ltd co's - it's cheaper for them than employing someone directly (regardless of what the individual takes home).
Hate the game not the player.
Most of the SE folk I see are paying an average of about 20-30% of the tax liability of the employed on similar levels of earnings.
Can I have their accountants details please, the idea of paying 20-30% tax of a PAYE salary sounds great.
Me to please. After the way I've been ****ed over after paying all my tax and NI on a PAYE basis all my life, I fancy reducing my tax bill by two thirds
I won't hold my breath though, eh? As we all know that thats utter bollocks. The only way you could achieve any significant savings on your tax bill is through fraud. It's as simple as that.
Just to go back to the original thread title:
Being self employed. Are we screwed in the next budget?
We already are being screwed. Other than 'my mate knew this bloke who...' made up stories, its safe to say that the self-employed have been paying the same tax as employees, yet two thirds of them have received no government support at all over the last year.
A lot of emotion in this thread and understandably so. But I think there is a danger of conflating two issues, ie do the self-employed pay enough tax, and have there been shortcomings in the support given to the self employed during the pandemic.
Full disclosure here, in that I’m a relatively high earning PAYE employee and have been for the last 20 years, and for a long time I have felt the answer to the first question is that the self-employed should pay more (recognising it has to be earnt first of course)..
That is a different issue though to whether people have been hung out to dry during the pandemic and based on Binners experience, and others I know there have been mistakes made which should be sorted out.
I sometimes see people running the argument that what they put in should reflect what they get out, but that’s nonsense - on that basis I should have my own Eurofighter by now!😀
Binners I hope it gets sorted out for you, incredibly tough situation to be in so good luck.
-You break your ankle – 8 weeks off work.
-Your kid needs to be cared for – you lose a day’s pay
-No pension scheme.
-No employment rights. Your customers can just tell you to piss off from one day to the next.
-Endless cost of tools, vehicles, insurance, post-modern need for compliance, certificates, registration, certificates, red tape, companies house and accountant fees.All the above comes at a huge huge cost. The reason lots of self employed people don’t pay very much tax, is because they are kidding themselves about how much they actually earn.
They see reasonable amounts of money ebbing and flowing in their account and estimate they are earning far more than they are.
There will be the idiots on here who say “well, you have to price those things into your business then don’t you?”, but in reality the world doesn’t really work like that.
Being self employed is a hugely risky business. There are limited tax benefits to be had at the moment, but they are extremely limited and you are constantly exposed to the risk of illness/injury and the whims of the market.
All of this recent nonsense is answered by this ^ earlier post and in particular this statement. It's easy to see £50,000 flowing through your accounts as self employed, but in reality you will actually be earning 25,000 of that. The rest is cash flow. Very easy to kid yourself you make 50k though.
and others I know there have been mistakes made which should be sorted out.
They're not mistakes. 12 months ago they could be categorised as mistakes. Mistakes would be corrected. Never mind correcting it, the government have refused to even acknowledge it, despite it clobbering 3.6 million taxpayers. They still refuse to meet with the organisation 'Excluded UK' who represent those 3.6 million.
Its now glaringly evident that the self-employed were deemed as acceptable collateral damage and sacrificed.
There was no mistake. This was a conscious government decision
Full disclosure here, in that I’m a relatively high earning PAYE employee and have been for the last 20 years, and for a long time I have felt the answer to the first question is that the self-employed should pay more (recognising it has to be earnt first of course)..
Can I suggest that people who feel this do worked examples of how much tax they'd pay as self-employed/contracting? Use whatever tax efficiencies you can find.
@binners at least one silver lining may be a drop in support for the "party of business" but I won't hold my breath.
@binners I think the problem is you are technically not seen as self employed, rather as a temp PAYE worker. So similar to a zero hours contract worker in a lot of ways.
I guess had the supermarkets not been mobbed and they had reduced the hours of a lot of zero hours staff in the issue might have been a bit more visible to the average man in the street.
Can I suggest that people who feel this do worked examples of how much tax they’d pay as self-employed/contracting? Use whatever tax efficiencies you can find.
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
then my mobile phone which is essential for work as its the only way to access my off duty - claim that partly against tax only a few pounds tho
then my home desktop - essential to do my re-validation - claim that partly against tax
In actual fact I bought an ebike for the commute and cannot claim that against tax
I don’t think there’s much wrong with the current system. Directors declaring dividends on net of tax earnings will pay a bit less income tax than a comparable salary, and definitely less NI - but often with the considerable risk of their personal assets being used as security on business liabilities. That risk has to have some reward or people won’t do it. The gap isn’t huge at all to salaried staff, despite what people think.
There are much bigger fish to fry to increase the public purse than gains in higher taxes to directors. My landlord (commercial) is legally set up in the Cayman Islands and pays next to no UK tax at all on all his property income. Amazon/Apple/Google and so on legally contribute very little tax - that needs to change. The huge amount of cash business done with tradesman. Drug dealers. The list goes on - but it’s a harder problem to solve than just whacking NI on dividends or increasing the tax rate a few percent to the higher rate.
Just checked in the Tax Planning Handbook and the difference in tax on £100k of profit fully distributed to an owner is 53.4% if paid as a salary and 49.0% if paid as a dividend. This includes all taxes (inc company tax) and NI. However if other tax planning measures are factored in like paying a spouse £10,000 (say) then the difference is more like 53.4% versus 47.0%. So, if the advantage associated with dividends were removed it would cost a business owner an extra £4,400 in tax per annum (on a £100k) - obviously less if lower earnings/more on higher earnings.
@binners at least one silver lining may be a drop in support for the “party of business” but I won’t hold my breath.
Indeed. They've just been discussing Keir Starmer and Labour on Five Live and the first point they raised was that Labour should be absolutely hammering the fact that the Tory Party have essentially abandoned the self-employed and SME's, which surely constitute their traditional core support*, prior to them becoming UKIP at least
@binners I think the problem is you are technically not seen as self employed, rather as a temp PAYE worker. So similar to a zero hours contract worker in a lot of ways.
You're probably right. We don't really know. I'd just like the government would engage with us to tell us exactly what it is we're defined as. Theres loads of us and we haven't got a clue where we're at. All we know is that we are neither 'employed' nor 'self-employed' as far as the government are concerned. So what are we? Who knows?
Apparently we don't exist. Though all the tax and NI we've paid over the years on a PAYE basis suggests we definitely do.
* I have never voted Tory, personally
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
then my mobile phone which is essential for work as its the only way to access my off duty – claim that partly against tax only a few pounds tho
then my home desktop – essential to do my re-validation – claim that partly against tax
In actual fact I bought an ebike for the commute and cannot claim that against tax
I did say worked examples.
Company owned cars are hairier than you might expect. And well, it only makes a difference if you actually bought a car.
Mobile phone, sure - but, as you say - minimal difference.
Home desktop, sure - but how often do you buy a new one that it makes a tangible difference to the tax you'd pay averaged over the years? And well, lots of employees don't use their company purchased laptops *solely* for work. I don't see that the self employed are better off than many employees on this.
eBike - many employers offer a cycle to work scheme, which would indeed allow you to offset tax.
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
No, you could probably lease one through work.
then my mobile phone which is essential for work as its the only way to access my off duty – claim that partly against tax only a few pounds tho
No you can't as its not necessary in the execution of your duties. Taking a call for a ham shift isn't working from home.
then my home desktop – essential to do my re-validation – claim that partly against tax
Again, that's not working from home. I dare say your employer has a computer available for those that require it for essential purposes.
In both those cases the usage couldn't justify the tax claim.
In actual fact I bought an ebike for the commute and cannot claim that against tax
No cycle to work in NHS?
Bear in mind also that all those pre-tax perks would hammer your final salary figure in the run up to retirement as well. So it's not as clear cut as you make it.
Just checked in the Tax Planning Handbook and the difference in tax on £100k of profit fully distributed to an owner is 53.4% if paid as a salary and 49.0% if paid as a dividend.
Yeah, that's the thing - there's a difference, but there's not a *vast* difference.
Personally, I'm okay with that.
Those who think things like buying a car through a company to "save a chunk of cash" need to try calculating the real benefit. Although electric cars are a slightly different story at the moment.
Those who think things like buying a car through a company to “save a chunk of cash” need to try calculating the real benefit.
Doing things with actual numbers might take away from the righteous indignation, though.
I think there's a lot of judgement being made here without knowing the finer details (on both sides of the argument).
I'm a contractor working through a Ltd company, mainly driven by clients who used to refuse to engage with anyone who didn't due to liability issues.
All this talk of everyone who isn't PAYE is tax avoiding is quite frankly a load of bollocks.
The example of buying a car through the business to offset tax is a classic. If I did that and parked the car at home overnight, it immediately becomes a benefit in kind and I'd pay more BIK tax than any savings I'd make. Also its then owned by the company which has a load of other complications when it comes to insurance and selling it on etc.
From my perspective there are pros and cons of employment, self employed and Ltd co. but its on a risk and reward basis. I earn more money than I would as a PAYE employee, but I have a lot more costs, risks and zero benefits so overall it works out about the same. I'm about to finish my current contract and the way the market is I'm unlikely to pick up another one for at least a couple of months if I'm lucky. That's just the way it is!
I see operation divide and conquer is going well. 😆