Labour Party proposals

polymaff

Yes, sad old Polymaff has been looking at it...:)

Section 11. Other tax and miscellaneous changes

Marriage Allowance

In their October 2019 ‘Estimated cost of non-structural tax reliefs’ HMRC forecast £535m of Marriage Allowance to be claimed under the system which allows “the transfer of 10% of the tax free personal allowance between couples who are married or in civil partnerships”. Uplifted to account for forecast earnings growth.


... So what are they going to do? 11%? Are they implying that the PA will not be "uplifted"? If not so, do they understand percentages?

badmemory

I strongly suspect not a lot. There appear to be very few in the modern world who do actually understand percentages. Hopefully they will rapidly adopt the increase to the level that NI payments become due. The only tory manifesto thing that will benefit the under 65s & will maybe stop people doing the ageism thing. As in I AM OVER 65 & I DID NOT VOTE LEAVE but please don't let that prevent you being nasty to me, as my father once said my shoulders are broad enough!

csgohan4

Great Labour skew everything to help the poor and trash the middle and upper class. Not all of us were born with a silver spoon in our mouth, we actually worked hard to build our careers.


No such thing as a fair system. You work more you tax more, you work less or not at all and you have benefits such as tax reductions and/or UC.

Pennywise

csgohan4 wrote: »

Great Labour skew everything to help the poor and trash the middle and upper class.

Unless your a middle/upper earning public sector worker where Labour want to protect you, which gets themselves tied up in knots as they're not really for "the poor" - they're for union dominated industries and the public sector and those living on benefits. Plenty of "poor" working people they don't give a toss about.

badmemory

Just to add to my previous post. As long as the Tories keep the LEL at the current figure & just increase the amount that NI becomes payable, sounds like a really good idea. It is also something which only benefits those below State Pension age, which tactically would be good.


OMG I've just realised I have said a Tory policy was a good one. I need a very strong & I do mean very strong drink

Pennywise

badmemory wrote: »

Just to add to my previous post. As long as the Tories keep the LEL at the current figure & just increase the amount that NI becomes payable, sounds like a really good idea. It is also something which only benefits those below State Pension age, which tactically would be good.


OMG I've just realised I have said a Tory policy was a good one. I need a very strong & I do mean very strong drink

I agree. I mentioned on another thread that I hoped they understood the significance of the lower threshold, i.e. to gain "credits" for state benefits such as state pension without actually paying NIC. If they raise the lower threshold too, then it could mean lots of part timers not realising they're not qualifying for full state pension and they may end up having to pay class 3 voluntary contributions instead. I really hope they've thought it through and its not going to be yet another "unforeseen consequence" of a badly implemented good idea.

It's also good that it's a benefit for "workers" whereas an income tax reduction/personal allowance increase would benefit potentially everyone, including pensioners, buy to let-ers, people living on investment income, etc. I've long said that "workers" get a raw deal due to NIC (as only workers pay it) so this is a very welcome change that only benefits workers and I hope it continues.

haras_nosirrah

the one about taxing dividends at the same rate as income tax at the moment

I have a limited company where I am sole director and I pay myself a low salary and the rest in dividends. At the moment I pay corporation tax at 19% and then any dividends I take out are taxed at 7.5% as I don't go over the 50k so essentially I am taxed at 26.5% so not too disimilar to the paye

If they are proposing to increase corporation tax to 21% (my company earns sub 100k) and also tax dividends at the standard tax rate so 20% as a basic tax payer then surely company directors will be being charged 41% on all income or am I reading this wrong?

pjcox2005

Yes and no.


If you change to taking it as salary, you wouldn't be subject to corporation tax on that element as salary is an allowable cost although you wouldn't have the NI saving just like an employee. So you'd end up being taxed at normal PAYE rates if took the full profits as salary. (simplified slightly as ignores capital allowances/depreciation etc)


On the profits above salary which you take as a dividend, then yes you'd be subject to CT (as no relief) and then a dividend tax at 20% (I'm only basing this on your question, not looked at Labour proposal). Think that would work out as an effective rate of c.37%. i.e. for £100 profit, you'd be left with £63.2.


So in summary, yes it's worse than current position but aren't they encouraging you to adopt the same approach as someone on PAYE so you don't get a tax benefit. Obviously there is a discussion on whether individuals who set up a company should be rewarded by lower rates for taking on risk.

Pennywise

haras_nosirrah wrote: »

the one about taxing dividends at the same rate as income tax at the moment

I have a limited company where I am sole director and I pay myself a low salary and the rest in dividends. At the moment I pay corporation tax at 19% and then any dividends I take out are taxed at 7.5% as I don't go over the 50k so essentially I am taxed at 26.5% so not too disimilar to the paye

If they are proposing to increase corporation tax to 21% (my company earns sub 100k) and also tax dividends at the standard tax rate so 20% as a basic tax payer then surely company directors will be being charged 41% on all income or am I reading this wrong?

They probably don't understand the interaction between dividends, corporation tax and personal income tax. Brown certainly didn't with the foul ups he made re the taxation surrounding dividends. I can fully believe that if Labour did win (they've not a hope in hell's chance), then they'd do as they have said, then act surprised when people highlight the issues and take a few years of faffing around to correct it (just like Brown did). If only they passed these ideas by people who know what they're talking about!

ffacoffipawb

Pennywise wrote: »

They probably don't understand the interaction between dividends, corporation tax and personal income tax. Brown certainly didn't with the foul ups he made re the taxation surrounding dividends. I can fully believe that if Labour did win (they've not a hope in hell's chance), then they'd do as they have said, then act surprised when people highlight the issues and take a few years of faffing around to correct it (just like Brown did). If only they passed these ideas by people who know what they're talking about!

Nobody in the labour party knows anybody that knows what they are talking about.

https://www.dailymail.co.uk/news/article-6733909/John-McDonnell-said-Britons-fought-Israel-stripped-British-citizenship.html

Pennywise

pjcox2005 wrote: »

Yes and no.


If you change to taking it as salary, you wouldn't be subject to corporation tax on that element as salary is an allowable cost although you wouldn't have the NI saving just like an employee. So you'd end up being taxed at normal PAYE rates if took the full profits as salary. (simplified slightly as ignores capital allowances/depreciation etc)

The spanner in the works in employers NIC which is an extra 13.8% of the wage and thus makes a very big difference compared with taking the money as dividends. Employers NIC is actually why a lot of "one man" company owners take dividends. If it were just PAYE and employees NIC, there probably wouldn't be the same incentive to pay dividends. What they need to do is remove employers NIC for director/shareholders of close companies and then you really are levelling the playing field.