BBC article on micro-Ltds

[elsergiovolador]

Except you forgot to mention that dividends come from profits, which have corporation tax applied to them, currently at 19%, before then having dividend tax applied at 7.5% (lower rate)

The contractors I know also don't pay themselves 30k to be @ 7.5% after corp tax, but much more, therefore their tax bills are substantial.

If they believe contractors pay not enough tax, then there should be a better way to do it - for example increase the dividend tax, so it will match PAYE plus employers NI by pound

Improve PAYE so it is as easy to get a salary as dividend.

Lastly, merge income tax with NI.

I already listed three better ideas. Me detective mind tells me, the tax is not the reason IR35 is pushed through.

This is the same thing as talking about children safety when implementing censorship.

[Paralytic]

Except you forgot to mention that dividends come from profits, which have corporation tax applied to them, currently at 19%, before then having dividend tax applied at 7.5% (lower rate)

It has, yes, but that's the company's money, not the directors. And any portion paid out as salary does not attract CT.

The contractors I know also don't pay themselves 30k to be @ 7.5% after corp tax, but much more, therefore their tax bills are substantial.

In that case, the 3 year Dividend Charge would be less, if not zero.

I still think expecting to be taxed a a shareholder but get benefits as an employee is not right.

[oilboil]

Except you forgot to mention that dividends come from profits, which have corporation tax applied to them, currently at 19%, before then having dividend tax applied at 7.5% (lower rate)

I think you are focussing on the wrong part here, Limited Companies do still get an advantage through DIV instead of PAYE

To make calcs easier I've assumed you paid a base salary of £12,500 and a DIVI of £2k already (the tax free DIVIDEND)

So you wanted to disperse 20K of money to your employee (you) then there is a difference

PAYE

Income Tax 20% - £4,000
Employee NI 12% - £2,400
Employer NI 13.8% - £2,760

Total to GOV = £9,160

DIVIDEND ROUTE

Corp Tax 19% - £3,800
Dividend Tax 7.5% - £1,500

Total to GOV £5,300

NOW - If you were to argue that due to lack of sick pay, holiday pay, pension contributions and other benefits that the difference wasn't that great I'd agree, but on a pure TAX TAKE discussion there is a massive difference that gives contractors a big boost in raw take home cash (but no holiday/sick/benefits etc - so quickly eroded)

[d000hg]

Are you sure self-employed people pay double-NI? The comparison between SE and Ltd-divi is surely the more relevant one... also it would be useful to run it at low-ish income (say £25k gross), medium (50k?) and high (100k).

If I get time I'll run it but SE isn't an area I ever used.

[elsergiovolador]

NOW - If you were to argue that due to lack of sick pay, holiday pay, pension contributions and other benefits that the difference wasn't that great I'd agree, but on a pure TAX TAKE discussion there is a massive difference that gives contractors a big boost in raw take home cash (but no holiday/sick/benefits etc - so quickly eroded)

Why don't you compare real life values? For example 70k salary versus 70k revenue (minus accounting, insurance, office, equipment and other costs)?

Such comparisons like yours are unhelpful and give people wrong image.

[oilboil]

Why don't you compare real life values? For example 70k salary versus 70k revenue (minus accounting, insurance, office, equipment and other costs)?

Such comparisons like yours are unhelpful and give people wrong image.

Are they, because they are exactly my current real world example having taken many months of this year. How about you try to stop thinking that everyone is like you

[DSF70]

I think you are focussing on the wrong part here, Limited Companies do still get an advantage through DIV instead of PAYE

To make calcs easier I've assumed you paid a base salary of £12,500 and a DIVI of £2k already (the tax free DIVIDEND)

So you wanted to disperse 20K of money to your employee (you) then there is a difference

PAYE

Income Tax 20% - £4,000
Employee NI 12% - £2,400
Employer NI 13.8% - £2,760

Total to GOV = £9,160

DIVIDEND ROUTE

Corp Tax 19% - £3,800
Dividend Tax 7.5% - £1,500

Total to GOV £5,300

NOW - If you were to argue that due to lack of sick pay, holiday pay, pension contributions and other benefits that the difference wasn't that great I'd agree, but on a pure TAX TAKE discussion there is a massive difference that gives contractors a big boost in raw take home cash (but no holiday/sick/benefits etc - so quickly eroded)

Your final para is the balancing part of the equation.

[d000hg]

Why don't you compare real life values? For example 70k salary versus 70k revenue (minus accounting, insurance, office, equipment and other costs)?

Such comparisons like yours are unhelpful and give people wrong image.

You think everyone running a Ltd has gross profit/billing of £70k?!

Speaking of real life, you might like to visit the real world...

[d000hg]

Your final para is the balancing part of the equation.

Self-employed do not get sick pay or holiday pay or pension contributions either.

[elsergiovolador]

Are they, because they are exactly my current real world example having taken many months of this year. How about you try to stop thinking that everyone is like you

In that case do you think you should pay as much tax as employee, given you don't get the same benefits?