The new dividend tax - does this mean contractors who paid themselvs big divvies

TheBlueHorse

instead of PAYE on a salary will pay more tax now?

cells

Possibly. In most cases yes but in some cases they may decide that paying 10% capital gains is a better idea which will mean they pay a good deal less

TheBlueHorse

one thing that angers me is that friends on essentially the same income as me, but contracting, rather than employed, get to keep so much more of it. It was unfair. Glad it has been slightly redressed.

lisyloo

instead of PAYE on a salary will pay more tax now?

If they continue to pay themselves dividends then yes.
Many will review the way they pay themselves and might find a way round it.

I understand your angwe but just wondering why you haven't joined them?

Generali

TheBlueHorse wrote: »

one thing that angers me is that friends on essentially the same income as me, but contracting, rather than employed, get to keep so much more of it. It was unfair. Glad it has been slightly redressed.

What's fair? All you do is follow the tax rules.

lisyloo

In most cases yes but in some cases they may decide that paying 10% capital gains

Can you explain please.
How do contractors pay 10% CGT.
Wouldn't it be corporation tax? or is there some other way.
Of course it can go direct into a pension which is a bit like PAYE salary sacrifice.

kabayiri

Generali wrote: »

What's fair? All you do is follow the tax rules.

This government and the last had legislation in place to challenge so called "disguised employment", whereby contractors had an income advantage over permanent employees performing essentially the same role.

When I checked some years ago they had taken 1400+ cases to court.

*The state won just 6 of these 1400+*

Aaaah, I guess when you get your backside spanked you go back to the drawing board!

lisyloo

whereby contractors had an income advantage over permanent employees

Contractors with zero employment rights, no sick pay, no holiday pay etc. should have an income advantage.
What they shouldn't have is a tax advantage.

kabayiri

lisyloo wrote: »

Contractors with zero employment rights, no sick pay, no holiday pay etc. should have an income advantage.
What they shouldn't have is a tax advantage.

I would agree that contractors are more disposable and at lower cost to business. They have their uses.

Unfortunately, some employees just see the headline rate, forgetting the other benefits they receive.

movilogo

instead of PAYE on a salary will pay more tax now?

It depends. But mostly they would pay more tax than they are paying now. Mind that for 1-man-band companies, they would pay corporation tax as well as personal income tax. So far they could pay themselves very low wage and big dividends. But now their tax burden increases significantly.

For some of them, contracting may not be beneficial at all - especially when they don't get holidays, training etc.

There are also changes what they can claim under "expense".

lisyloo

some employees just see the headline rate, forgetting the other benefits they receive

Yep, most of the contractors I know won't take a day off sick unless they are really dying.
As a PAYE employee I will take a day off when I'm sick and can't work effectively.