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

theEnd

lisyloo wrote: »

So that means any contractor paying themselves £10K in income, £30K in divvies and putting £40K into their pension doesn't have to pay income tax on benefits.

Dividends would count, so it's exactly the same as an employee.

paddyrg

There seems to be a lot of jealousy here from people who don't understand how all the taxes combine. That's fine, that's why most people are PAYE, so they don't have to understand, but they often see two different numbers and assume they're at the wrong end of them.

Earlier example of £50k PAYE or £60k contractor - the contractor is almost certainly worse off than the employee, despite seeing £10k more headline.

If paying a 'permie' £50k, I also have to 'pay' (or provision) 12.07% (or something close to that) holiday pay. I also have to pay another ~11% NI (separate from the employees contribution), so already costs me approaching 25% more to hire someone PAYE. Now I have to still pay them if they get pregnant, get sick, etc. I have to provide them with tools to do their job (which a contractor may have to bring their own), I may have a benefits package (I worked one place where the benefits package was calculated at 12% of salary), maybe a company car, etc. Maybe we have a Christmas bonus? Maybe a Christmas party? Redundancy provision? Pension contributions at 3.5%? For the figures above, £50k/£60k, I'd take the £50k PAYE in a heartbeat.

The contractor, however, has to do without the above (or find it for themselves), plus have corporation tax and dividend taxes amounting to the same as being paid PAYE, only saving is the NI contributions in fact. You can try expensing a meeting in Acapulco, sure - if it is a legitimate meeting (eg you're doing a deal with an Acapulco-based company) then what's the fuss? You might elect to stay on an extra day for jet lag, and anything that looks like a holiday you pay for privately (eg an extra few days hotel costs). HMRC won't be bothered unless they suspect that the meeting was illegitimate. They also have zero job security. Nil.

caronoel

lisyloo wrote: »

When contractors can get trains paid this seems wrong when PAYE employees have to pay for their own commute.

Ever wondered who sits in the first class carriage on commuter trains? Why not if you can write your commuting costs off against tax

chucknorris

afly wrote: »

A dividend is supposed to be a reward for prior investment. Those who are getting dividends from large cash investments are untouched by the changes

That is not correct, it also affects dividends from investing in shares too, but obviously excluding ISAs' and SIPPPs'. Granted it will only cost those who have significant portfolios, in my case the marginal rate of dividend income tax rises from dividends from above £550k of my share portfolio. At the moment I haven't quite got that much (when the SIPP/ISA's are subtracted), but this budget hasn't been kind to me. It also hits my property portfolio taxable income, when I sell up, shares where going to be where the equity was moved to. I'm currently having a re-think.

lisyloo

Ever wondered who sits in the first class carriage on commuter trains? Why not if you can write your commuting costs off against tax

I don't think you're right there.
It can be claimed as business expense, so it gets tax relief. It doesn't get written off against tax.
It's not free - it's something like 40% cheaper or thereabouts.

We use first class for that reason.
The cost comes our of the business and not our personal income, but it's not free.

cells

caronoel wrote: »

Evdon'ondered who sits in the first class carriage on commuter trains? Why not if you can write your commuting costs off against tax

I get so bored having to explain this to so many cleaver people


you can not write off a train ticket against TAX

a train ticket is a COST
which reduces your PROFIT
And if you have less profit you have less TAX to pay

and the result is that most business will buy the cheapest ticket as business aim to maximise profit.


So who sits on first class.
Well who sends their kids to private schools?
Who pays for private health care?
About 5-10% of the population is very well off they can afford to do so.
likewise some businesses are very profitable and they want to pay the higher cists for a higher grade service.

Its got nowt to do with writing off a tocket against tax as that aint possible

cells

Shares within a pension or ISA are exempt which is how I suspect most shares are held.

Also plenty of shares don't pay divideds at all maybe this tax will mean even more companies now decide to do share buybacks or just increase their NAVs than pay divis.

also bear in mind if corp tax is reduced to 18% that means profits after tax should go up which should somewhat offset the div tax (higjer divi but more tax)

jimibaboza

The train ticket reduces your profit so it reduces your corp tax payable.

As it is the company paying for it, there is no income tax payable on it as the amount is not technically income. Of course there are rules to stop this but they is circumvented by pretending to earn less than 10k a year so the benefit in kind rules don't apply.

To top it all all off, the contractor can then claim VAT back on the ticket.

chucknorris

cells wrote: »

Shares within a pension or ISA are exempt which is how I suspect most shares are held.

Also plenty of shares don't pay divideds at all maybe this tax will mean even more companies now decide to do share buybacks or just increase their NAVs than pay divis.

also bear in mind if corp tax is reduced to 18% that means profits after tax should go up which should somewhat offset the div tax (higjer divi but more tax)

I have no idea why you have posted this? The shares in my portfolio outside of my SIPP and ISA do pay dividends (that's why I invested in them in the first place, for the dividend income).

I stand by what I posted, some investors with substantial share portfolios will pay more tax on their dividend income. In my case the marginal rate of dividend income tax increases when my portfolio rises above £550k (excluding ISA and SIPP). I am almost at that point now, I'll be way over when I start selling property (if I continue with my original plan, which is now open to further consideration).

lisyloo

Of course there are rules to stop this but they is circumvented by pretending to earn less than 10k a year so the benefit in kind rules don't apply.

Sorry Jim, I'm not getting what you are saying here.
This is a business expense purely for business.
It's not a personal benefit in any way.
Or are you saying that 1st class is a benefit?
Some who work during their journeys would argue that and so would their accountants.

To top it all all off, the contractor can then claim VAT back on the ticket.

Public transport is zero rated for VAT (you're losing credibility now - where are you getting your information? - ours come from a professional accountant)