Why are self employed directors not eligible for financial support? Please explain

CoopersHumum

neilmcl said:

CoopersHumum said:

comeandgo said:

You adjust your wages and dividends with the intent of reducing the amount of tax you pay.  Sometimes this can bite you in the bum.  This is one of this times.  

I pay tax on the dividends as well as the wages...I pay corporation tax on the profits that are left. My dividend earnings are still taxable... I feel like I’m being thick here as I don’t actually benefit from lower tax payments as a consequence of being paid by mix of dividends and wages...

thanks for your time and reply...very much appreciated

Have you forgotten about NIC?

NIC paid too... I think I’ve just been advised to set it up this way to be tax efficient since my earnings do go up and down each year. Nevertheless, it is still rather catastrophic for me to be completely without income and no route for assistance through current channels.
thanks for taking the time to respond to me.

CoopersHumum

diggingdude said:

Those lower National Insurance contributions are coming back to bite people now, why else would people pay themselves this way?

We pay ourselves this way because we trust accountants to advise appropriately when we first set the company up, which is what I did.
I didn’t for one minute think I was doing anything against the law by structuring my company and payments this way. It also made sense since there is no one covering sick pay or holiday pay but my little company and its small profit. 

I do think generally folk forget that the self employed have to cover this; it’s not all straight forward income and profit.

im grateful for you taking the time to respond to me

Hermann

You haven't done anything wrong, just organised your affairs within the rules.

Sadly the support schemes don't include all your income, but again thats just the rules. Keep an eye out though as guidance could change, and some are campaigning for your situation, seems unlikely to change but worth keeping an eye on it.

kipper01

in the same boat mate, I only set up the ltd company in may 2019 
haven't paid a penny as yet, only just heard from the accountant asking for me to send all invoices, bank statement, ect,ect.   

sanch3z_77

In short this is a shambles... I understand the lower NIC but this isn't the rationale behind many small companies of which I am one. I run this way as the profit I make year to year fluctuates massively and I simply can't have a salary the company can't support. I choose to run my own business without a stakeholder pension, sick and holiday pay and other benefits others get because I get huge satisfaction I wasn't getting being employed by someone else.

As a small business owner you can't even furlough yourself as you have to respond to existing and potential clients even if the jobs are only worth a few quid as to not could be catastrophic in the long-term.

I have a pilot friend at, he is getting £2500 from the government for two months, then instead of 2 months with no pay he is getting 50% for four months, so 50% + £2500... He'll likely still clear £12k+ per month but the likes of me will get zero. I'll have to go into debt for months until I can start working again... This just seems massively unjust.

How can us small business owners in the same situation get together to effect change? The government is forcing us to shut shop and turn work away as we would actually be better off financially.

Hermann

Some might say "Welcome to the real world" as they've been battling unjust rules in employment support for years whilst being branded Benefit Scroungers.

Now the majority of the workforce are benefit scroungers wanting to sit on their !!!!!! doing nothing whilst money just magically appears in their bank account! And it's terribly unjust when their bank account isn't included.

sanch3z_77

Hermann said:

Some might say "Welcome to the real world" as they've been battling unjust rules in employment support for years whilst being branded Benefit Scroungers.

Now the majority of the workforce are benefit scroungers wanting to sit on their !!!!!! doing nothing whilst money just magically appears in their bank account! And it's terribly unjust when their bank account isn't included.

Don't know if i'm taking this wrong but I have no desire to sit on my **** i've worked hard the last ten years trying to grow a business. Mine is in sports and international travel – two sectors potentially hit the hardest. I don't want a handout for nothing but support to get through this as other are getting isn't too much to ask!

LilElvis

CoopersHumum said:

comeandgo said:

You adjust your wages and dividends with the intent of reducing the amount of tax you pay.  Sometimes this can bite you in the bum.  This is one of this times.  

I pay tax on the dividends as well as the wages...I pay corporation tax on the profits that are left. My dividend earnings are still taxable... I feel like I’m being thick here as I don’t actually benefit from lower tax payments as a consequence of being paid by mix of dividends and wages...

thanks for your time and reply...very much appreciated

Yes you have benefited by this arrangement - to the tune of several thousand pounds per year. For decades it has worked entirely in the favour of sole directors - this is the "once in a lifetime" event where it doesn't. If it makes you feel any better should my husband be furloughed he will receive less than 25% of his salary - and he has paid tax on every single penny he has earned so wouldn't even receive back the tax he has paid in the last few months.

Hermann

sanch3z_77 said:

Hermann said:

Some might say "Welcome to the real world" as they've been battling unjust rules in employment support for years whilst being branded Benefit Scroungers.

Now the majority of the workforce are benefit scroungers wanting to sit on their !!!!!! doing nothing whilst money just magically appears in their bank account! And it's terribly unjust when their bank account isn't included.

Don't know if i'm taking this wrong but I have no desire to sit on my **** i've worked hard the last ten years trying to grow a business. Mine is in sports and international travel – two sectors potentially hit the hardest. I don't want a handout for nothing but support to get through this as other are getting isn't too much to ask!

Didn't mean to suggest you personally wanted to do nothing.

More referring to the situation, without the crisis there are horrendous injustices in the system yet when people raise them they are referred to as benefit scroungers wanting to sit around doing nothing when that is far from true.

fenwick458

LilElvis said:

Yes you have benefited by this arrangement - to the tune of several thousand pounds per year. For decades it has worked entirely in the favour of sole directors - this is the "once in a lifetime" event where it doesn't. 

I'm not sure theres as a big of a difference as everyone thinks, there used to be, but a dividend tax was brought in about 4-5 years ago.  If I'm reading the OP correctly they say "small salary & dividends equaling 25k", in no way will that save several thousands of pounds per year.
comparing the 2 side by side, (numbers might not be spot on to make the maths easier...)
both get £12500 tax free, so that leaves £12500
salary way: 20% income tax plus 11% NI £3875 to pay
dividends way: 19% corporation tax and 7.5% dividend tax £3312.50
so thats a difference of £562.50... 
It's hardly like we are all tax evading multimillionaires with offshore accounts. Only reason I have the LTD company still is because I'd like to keep my personal assets separate from the business so if something were to go wrong on a job then I have a bit of protection. it's clearly not to save loads on tax because I don't, the ltd co needs an accountant which costs £1000 per year