Share dividend tax increase

Prism

NedS said:

solidpro said:

p00hsticks said:

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

So are you saying that if your salary is between the Lower Earnings Limit of £6240 and the Primary Threshold of £9500 you still chalk up an NI year but pay nothing in NI?

Can you think of any reason our accountant suggests were pay salaries of £9999 per year (with the rest in dividends)? AFAIK this does incur a (small) NI charge each year.

Thanks

To increase the amount of furlough you were able to claim? Seriously, you'd have to ask them. Standard practice seems to be to pay yourself the primary threshold each month, ensuring no NI or income tax is paid, and then take a dividend to utilise remaining allowances assuming profits permit.

There isn't much in it (around £700) but for optimal tax you would pay up to the secondary threshold which also avoids employer NI too at 13.8%. 

Daliah

p00hsticks said:

Daliah said:

Prism said:

Daliah said:

eskbanker said:

Daliah said:

Prism said:

It affects me as a company director paying myself dividends but I don't pay national insurance. Also, dividend tax only starts after the tax free allowance (plus the £2k) rather than the NI which begins at the secondary threshold. So I will pay a little less than a PAYE employee. I also won't need to pay the employer NI increase.

Seems like a reasonably fair tax overall that gets everyone to pay a little.

@Prism: if you don't pay NI, are you foregoing your state pension rights?

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions highlights that you can earn up to the primary threshold of £797 per month without paying NI, but as long as your income exceeds the lower earnings limit (£520/month) then "Employees do not pay National Insurance but get the benefits of paying [such as pension rights]", so many will calibrate their earnings accordingly....

@Prism seems to be self-employed though

I am a director of my own limited company and so can pay myself as Eskbanker suggests.

So are you saying you get state pension rights without ever paying NI?

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

I know that.

I also know that LEL and PT were designed to help people who are genuinely on low earnings.

They were not intended for people to evade paying NI but I note with interest that there are people on the MSE forum who appear to endorse such tax evasion.

dunstonh

solidpro said:

p00hsticks said:

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

So are you saying that if your salary is between the Lower Earnings Limit of £6240 and the Primary Threshold of £9500 you still chalk up an NI year but pay nothing in NI?

Can you think of any reason our accountant suggests were pay salaries of £9999 per year (with the rest in dividends)? AFAIK this does incur a (small) NI charge each year.

Thanks

Most accountants seem to use the salary to primary threshold and dividends above. Sometimes the secondary threshold depending on employers allowance.  Others use the salary to the personal allowance and dividends above.   Not sure why yours has £9999 and then dividends.

eskbanker

Daliah said:

p00hsticks said:

Daliah said:

Prism said:

Daliah said:

eskbanker said:

Daliah said:

Prism said:

It affects me as a company director paying myself dividends but I don't pay national insurance. Also, dividend tax only starts after the tax free allowance (plus the £2k) rather than the NI which begins at the secondary threshold. So I will pay a little less than a PAYE employee. I also won't need to pay the employer NI increase.

Seems like a reasonably fair tax overall that gets everyone to pay a little.

@Prism: if you don't pay NI, are you foregoing your state pension rights?

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions highlights that you can earn up to the primary threshold of £797 per month without paying NI, but as long as your income exceeds the lower earnings limit (£520/month) then "Employees do not pay National Insurance but get the benefits of paying [such as pension rights]", so many will calibrate their earnings accordingly....

@Prism seems to be self-employed though

I am a director of my own limited company and so can pay myself as Eskbanker suggests.

So are you saying you get state pension rights without ever paying NI?

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

I know that.

I also know that LEL and PT were designed to help people who are genuinely on low earnings.

They were not intended for people to evade paying NI but I note with interest that there are people on the MSE forum who appear to endorse such tax evasion.

It's clearly not tax evasion, but could be perceived as tax avoidance - best to understand the crucial difference between these terms before making comments like that....

Thrugelmir

Alexland said:

booneruk said:

talexuser said:

horrendous billions on Test and Trace which even the parliamentary committee said had negligible effect. 

I never understood this - are they saying if we hadn't built up testing capacity of over a million a day and instead did no testing that we'd have had the same outcome?

NHS money being wasted in lots of people standing around doing nothing in car parks gives a poor impression when taxes are being raised.

Easier and cheaper than magically creating intensive care beds and staff to resource them. Out of an 8 bed unit at our local hospital. Three are currently occupied by pregnant mothers who are suffering from Covid and are unvaccinated. At any time there might be another wave of Covid with a new variant. 

Daliah

eskbanker said:

Daliah said:

p00hsticks said:

Daliah said:

Prism said:

Daliah said:

eskbanker said:

Daliah said:

Prism said:

It affects me as a company director paying myself dividends but I don't pay national insurance. Also, dividend tax only starts after the tax free allowance (plus the £2k) rather than the NI which begins at the secondary threshold. So I will pay a little less than a PAYE employee. I also won't need to pay the employer NI increase.

Seems like a reasonably fair tax overall that gets everyone to pay a little.

@Prism: if you don't pay NI, are you foregoing your state pension rights?

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions highlights that you can earn up to the primary threshold of £797 per month without paying NI, but as long as your income exceeds the lower earnings limit (£520/month) then "Employees do not pay National Insurance but get the benefits of paying [such as pension rights]", so many will calibrate their earnings accordingly....

@Prism seems to be self-employed though

I am a director of my own limited company and so can pay myself as Eskbanker suggests.

So are you saying you get state pension rights without ever paying NI?

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

I know that.

I also know that LEL and PT were designed to help people who are genuinely on low earnings.

They were not intended for people to evade paying NI but I note with interest that there are people on the MSE forum who appear to endorse such tax evasion.

It's clearly not tax evasion, but could be perceived as tax avoidance - best to understand the crucial difference between these terms before making comments like that....

I very well understand the difference between tax avoidance and tax evasion. I deliberately chose the term evasion, in the same vein as those who deliberately orchestrate their earnings in such a way that they evade paying NI.

I know that people can go to great lengths to explain why their tax evasion is actually only tax avoidance. Legally they can probably win this argument unless they are exceptionally dim. Morally their actions are rather questionable, to say the least. The fact that they don't care that their actions are considered questionable make them actually quite reprehensible.

eskbanker

Daliah said:

eskbanker said:

Daliah said:
I know that.

I also know that LEL and PT were designed to help people who are genuinely on low earnings.

They were not intended for people to evade paying NI but I note with interest that there are people on the MSE forum who appear to endorse such tax evasion.

It's clearly not tax evasion, but could be perceived as tax avoidance - best to understand the crucial difference between these terms before making comments like that....

I very well understand the difference between tax avoidance and tax evasion. I deliberately chose the term evasion, in the same vein as those who deliberately orchestrate their earnings in such a way that they evade paying NI.

I know that people can go to great lengths to explain why their tax evasion is actually only tax avoidance. Legally they can probably win this argument unless they are exceptionally dim. Morally their actions are rather questionable, to say the least. The fact that they don't care that their actions are considered questionable make them actually quite reprehensible.

So what law are you asserting is being broken here?

Bobziz

Any chance we can stick to discussions about savings and investments ?

Prism

Daliah said:

Prism said:

Daliah said:

Prism said:

Daliah said:

eskbanker said:

Daliah said:

Prism said:

It affects me as a company director paying myself dividends but I don't pay national insurance. Also, dividend tax only starts after the tax free allowance (plus the £2k) rather than the NI which begins at the secondary threshold. So I will pay a little less than a PAYE employee. I also won't need to pay the employer NI increase.

Seems like a reasonably fair tax overall that gets everyone to pay a little.

@Prism: if you don't pay NI, are you foregoing your state pension rights?

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions highlights that you can earn up to the primary threshold of £797 per month without paying NI, but as long as your income exceeds the lower earnings limit (£520/month) then "Employees do not pay National Insurance but get the benefits of paying [such as pension rights]", so many will calibrate their earnings accordingly....

@Prism seems to be self-employed though

I am a director of my own limited company and so can pay myself as Eskbanker suggests.

So are you saying you get state pension rights without ever paying NI?

Yes that is currently the case although I did contribute for around 15 years while employed.

Gosh, my heart bleeds. Fifteen years of contributions, such immense hardship. Everyone should be entitled to free NI years after 15 years of contributions, shouldn't they :eyeroll

Yes, everyone who runs their own limited company as a director is entitled to a state pension without contributing to NI. That is completely intentional by HMRC who could absolutely change the rules if they wanted to.

Shall we have a go at anyone who uses salary sacrifice next to reduce their NI payments?

ColdIron

Daliah said:

eskbanker said:

Daliah said:

p00hsticks said:

Daliah said:

Prism said:

Daliah said:

eskbanker said:

Daliah said:

Prism said:

It affects me as a company director paying myself dividends but I don't pay national insurance. Also, dividend tax only starts after the tax free allowance (plus the £2k) rather than the NI which begins at the secondary threshold. So I will pay a little less than a PAYE employee. I also won't need to pay the employer NI increase.

Seems like a reasonably fair tax overall that gets everyone to pay a little.

@Prism: if you don't pay NI, are you foregoing your state pension rights?

https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions highlights that you can earn up to the primary threshold of £797 per month without paying NI, but as long as your income exceeds the lower earnings limit (£520/month) then "Employees do not pay National Insurance but get the benefits of paying [such as pension rights]", so many will calibrate their earnings accordingly....

@Prism seems to be self-employed though

I am a director of my own limited company and so can pay myself as Eskbanker suggests.

So are you saying you get state pension rights without ever paying NI?

Yes - anyone earning between the Lower Earnings Limit and the Primary Threshold gets NI credits without actually paying any NI (as do people claiming certain benefits such as Child Benefit, Univeral Credit, ESA and JSA)

I know that.

I also know that LEL and PT were designed to help people who are genuinely on low earnings.

They were not intended for people to evade paying NI but I note with interest that there are people on the MSE forum who appear to endorse such tax evasion.

It's clearly not tax evasion, but could be perceived as tax avoidance - best to understand the crucial difference between these terms before making comments like that....

I very well understand the difference between tax avoidance and tax evasion. I deliberately chose the term evasion, in the same vein as those who deliberately orchestrate their earnings in such a way that they evade paying NI.

I'm not so sure that you do

I know that people can go to great lengths to explain why their tax evasion is actually only tax avoidance.

No great lengths required. A widely understood difference between the two is misrepresentation. For instance if you made a declaration that was untrue (I earned this when I earned that) that would be evasion and is clearly not legal

Legally they can probably win this argument unless they are exceptionally dim. Morally their actions are rather questionable, to say the least.

Of course they can, if they represent their affairs honestly it is not evasion and HMRC will tax them accordingly in line with their rules

If you look at the HMRC website you will see many worked examples of how to structure your affairs to minimise tax (John earns x while Jane earns y. If John does z ... etc). Hundreds of thousands of small businesses make such legal declarations every year

However you are conflating legality with morality. There are no morality police at HMRC

The fact that they don't care that their actions are considered questionable make them actually quite reprehensible.

In your eyes, but you are making a moral and not legal judgement. Morality is a matter of opinion