Reduction of Dividend Allowance?

talexuser wrote: »

I see the debate is hotting up in the usual way. I think the conclusion is you should not introduce something with great fanfare which gets significantly reduced in a short time later (in HMRC terms).

I can see the "one-two punch" method of raising taxation becoming increasingly popular. They did the same with the Money Purchase Annual Allowance.

Why not start with 1k like the savings interest and see how revenues progress?

Because it would have amounted to a significant new tax levy on anyone with a five-figure sum invested outside ISAs and pensions. With a £5,000 limit they could announce that 85% of taxpayers wouldn't be affected.

There's a lot of scope to raise the 7.5%. To compare marginal total tax rate of employment vs profit from ltd company.
Lower Rate (20%): 40% vs 26%
Higher Rate (40%): 49% vs 46%

Can you explain where those figures come from i.e. what they are made up of, so we can see whether it's equivalent.


Our limited company has costs that don't apply to PAYE employees.
For example many contractors would be economically mobile and live away from home.
If there is to be a discussion on equivalence then it needs to take account of those kind of things.


Personally I think we need to be very careful what we dis-incentivise.
For example dis-incentivising a load of GPs from working after 55 because of the pension LTA is daft.


I'm reasonably emotionally detached, but if we are dis-incentivised from running a limited company then we will simply not do it, then you'll have skills shortages.

I have a few investment trusts and income funds that I am building up as a separate portfolio for dividend income.

I am thinking for going forward before this increases in amounts to bed and breakfast it and start this in my S&S ISA along with my VLS and side funds and still treat the two as separate but it keeps them all in an ISA tax wrapper, would this be logical thinking?

The dividend amount is way below the £2000 at the moment in the fund and share account, but in time this will increase and there maybe future changes so thinking to deal with this now before it would become a problem down the line.

Thanks

talexuser wrote: »

For S&S You should surely take the tax advantage of filling ISA allowances before anything else - except maybe pension depending on employer contributions?

I just looked at the bed and breakfast option on HL and I could transfer the fund and share amount into my remaining ISA allowance, then be fresh from April.

I think I will act on this and take advantage of the tax shelter and not have to think problems arising once that pot would grow in the fund and share, I will still treat them as separate portfolios but within the same ISA wrapper. Going to get this acted on

Thanks

polymaff wrote: »

... so you are presenting quite a partial view, don't you agree?

Rather than "clients", it should be "profits", and rather than "Employee Pays" (which I think was meant to be "Employee Paid" or "Employer Pays") it should be "Employee Benefits" - including the free provision of a workplace, paid leave, a subsidised pension etc. etc.

Sorry, typo. Should be "Employer Pays"

I'm ignoring the "Employee Benefits" as they're nothing to do with taxation. You charge the client more than they'd pay in wages to compensate for those things and on both sides, they're excluded before taxation takes place. To follow that through on my previous examples:

Higher Rate Employee
£150 - Total Cost to Employer
£50 - Various costs (pension, workspace, insurance, holiday....)
£12.12 - ENI
£87.88 - Total Salary Received by Employee
£35.14 - Tax
£1.75 - NI
49.0% - Total Marginal Tax Rate

Higher Rate Divd
£150 - Total Charge to Client
£50 - Various costs (pension, workspace, insurance, holiday....)
£100 - Total Profit
£20 - Corp Tax
£26 - Divd Tax
46.0% - Total Marginal Tax Rate

In this example I'd expect a Ltd company to charge £150/hour vs an Employee Salary of £87.88/hour. At the stage taxation kicks in (Profits vs Salary + ENI) they're both £100.