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and others I know there have been mistakes made which should be sorted out.
They're not mistakes. 12 months ago they could be categorised as mistakes. Mistakes would be corrected. Never mind correcting it, the government have refused to even acknowledge it, despite it clobbering 3.6 million taxpayers. They still refuse to meet with the organisation 'Excluded UK' who represent those 3.6 million.
Its now glaringly evident that the self-employed were deemed as acceptable collateral damage and sacrificed.
There was no mistake. This was a conscious government decision
Full disclosure here, in that I’m a relatively high earning PAYE employee and have been for the last 20 years, and for a long time I have felt the answer to the first question is that the self-employed should pay more (recognising it has to be earnt first of course)..
Can I suggest that people who feel this do worked examples of how much tax they'd pay as self-employed/contracting? Use whatever tax efficiencies you can find.
@binners at least one silver lining may be a drop in support for the "party of business" but I won't hold my breath.
@binners I think the problem is you are technically not seen as self employed, rather as a temp PAYE worker. So similar to a zero hours contract worker in a lot of ways.
I guess had the supermarkets not been mobbed and they had reduced the hours of a lot of zero hours staff in the issue might have been a bit more visible to the average man in the street.
Can I suggest that people who feel this do worked examples of how much tax they’d pay as self-employed/contracting? Use whatever tax efficiencies you can find.
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
then my mobile phone which is essential for work as its the only way to access my off duty - claim that partly against tax only a few pounds tho
then my home desktop - essential to do my re-validation - claim that partly against tax
In actual fact I bought an ebike for the commute and cannot claim that against tax
I don’t think there’s much wrong with the current system. Directors declaring dividends on net of tax earnings will pay a bit less income tax than a comparable salary, and definitely less NI - but often with the considerable risk of their personal assets being used as security on business liabilities. That risk has to have some reward or people won’t do it. The gap isn’t huge at all to salaried staff, despite what people think.
There are much bigger fish to fry to increase the public purse than gains in higher taxes to directors. My landlord (commercial) is legally set up in the Cayman Islands and pays next to no UK tax at all on all his property income. Amazon/Apple/Google and so on legally contribute very little tax - that needs to change. The huge amount of cash business done with tradesman. Drug dealers. The list goes on - but it’s a harder problem to solve than just whacking NI on dividends or increasing the tax rate a few percent to the higher rate.
Just checked in the Tax Planning Handbook and the difference in tax on £100k of profit fully distributed to an owner is 53.4% if paid as a salary and 49.0% if paid as a dividend. This includes all taxes (inc company tax) and NI. However if other tax planning measures are factored in like paying a spouse £10,000 (say) then the difference is more like 53.4% versus 47.0%. So, if the advantage associated with dividends were removed it would cost a business owner an extra £4,400 in tax per annum (on a £100k) - obviously less if lower earnings/more on higher earnings.
@binners at least one silver lining may be a drop in support for the “party of business” but I won’t hold my breath.
Indeed. They've just been discussing Keir Starmer and Labour on Five Live and the first point they raised was that Labour should be absolutely hammering the fact that the Tory Party have essentially abandoned the self-employed and SME's, which surely constitute their traditional core support*, prior to them becoming UKIP at least
@binners I think the problem is you are technically not seen as self employed, rather as a temp PAYE worker. So similar to a zero hours contract worker in a lot of ways.
You're probably right. We don't really know. I'd just like the government would engage with us to tell us exactly what it is we're defined as. Theres loads of us and we haven't got a clue where we're at. All we know is that we are neither 'employed' nor 'self-employed' as far as the government are concerned. So what are we? Who knows?
Apparently we don't exist. Though all the tax and NI we've paid over the years on a PAYE basis suggests we definitely do.
* I have never voted Tory, personally
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
then my mobile phone which is essential for work as its the only way to access my off duty – claim that partly against tax only a few pounds tho
then my home desktop – essential to do my re-validation – claim that partly against tax
In actual fact I bought an ebike for the commute and cannot claim that against tax
I did say worked examples.
Company owned cars are hairier than you might expect. And well, it only makes a difference if you actually bought a car.
Mobile phone, sure - but, as you say - minimal difference.
Home desktop, sure - but how often do you buy a new one that it makes a tangible difference to the tax you'd pay averaged over the years? And well, lots of employees don't use their company purchased laptops *solely* for work. I don't see that the self employed are better off than many employees on this.
eBike - many employers offer a cycle to work scheme, which would indeed allow you to offset tax.
When I was moved to a different site early in the pandemic I could have bought a car and claimed that against tax. that would have saved me a chunk
No, you could probably lease one through work.
then my mobile phone which is essential for work as its the only way to access my off duty – claim that partly against tax only a few pounds tho
No you can't as its not necessary in the execution of your duties. Taking a call for a ham shift isn't working from home.
then my home desktop – essential to do my re-validation – claim that partly against tax
Again, that's not working from home. I dare say your employer has a computer available for those that require it for essential purposes.
In both those cases the usage couldn't justify the tax claim.
In actual fact I bought an ebike for the commute and cannot claim that against tax
No cycle to work in NHS?
Bear in mind also that all those pre-tax perks would hammer your final salary figure in the run up to retirement as well. So it's not as clear cut as you make it.
Just checked in the Tax Planning Handbook and the difference in tax on £100k of profit fully distributed to an owner is 53.4% if paid as a salary and 49.0% if paid as a dividend.
Yeah, that's the thing - there's a difference, but there's not a *vast* difference.
Personally, I'm okay with that.
Those who think things like buying a car through a company to "save a chunk of cash" need to try calculating the real benefit. Although electric cars are a slightly different story at the moment.
Those who think things like buying a car through a company to “save a chunk of cash” need to try calculating the real benefit.
Doing things with actual numbers might take away from the righteous indignation, though.
I think there's a lot of judgement being made here without knowing the finer details (on both sides of the argument).
I'm a contractor working through a Ltd company, mainly driven by clients who used to refuse to engage with anyone who didn't due to liability issues.
All this talk of everyone who isn't PAYE is tax avoiding is quite frankly a load of bollocks.
The example of buying a car through the business to offset tax is a classic. If I did that and parked the car at home overnight, it immediately becomes a benefit in kind and I'd pay more BIK tax than any savings I'd make. Also its then owned by the company which has a load of other complications when it comes to insurance and selling it on etc.
From my perspective there are pros and cons of employment, self employed and Ltd co. but its on a risk and reward basis. I earn more money than I would as a PAYE employee, but I have a lot more costs, risks and zero benefits so overall it works out about the same. I'm about to finish my current contract and the way the market is I'm unlikely to pick up another one for at least a couple of months if I'm lucky. That's just the way it is!
I see operation divide and conquer is going well. 😆
The big differences in tax some refer to as tax planning / tax advantages benefits to the SE are in most cases going to be due to inappropriate claims for expenses which as suggested above is fraud not tax planning. I expect HMRC will be checking furlough claims pretty closely very soon..and if overclaims are made on furlough one might expect other claims like business expenses to be looked at as well while the books are open.
But there are different rules for expenses which can be claimed between an self-employed person on one hand and an employed person on the other (ignoring companies). So, a self employed person (not working through a company) can claim for expenses "wholly and exclusively" for the business. An employee has an extra test to pass to claim an expense which is the expense has to be "necessarily" incurred. So a self employed person could claim for a computer / protective work clothes / travel costs whereas an employee might not. This extra hurdle knocks on the head scope to claim much at all for an employee, even stuff which is incurred for work purposes. So when comparing the position for SE you have to be able to distinguish between the fraudulent claims and the differences baked into the rules.
I don't have a problem with the difference in rules either - it would be mayhem if employees could claim all "work related" expenses against tax and many "unfairnesses" would result. The SE should be able to claim valid business expenses, as they can now, but if they make claims for personal expenses then that is unfair/fraud but there are already rules against that - and I expect there is a much increased likelihood of them coming unstuck in future.
So a self employed person could claim for a computer / protective work clothes / travel costs whereas an employee might not.
Really that's an issue for people to take up with their employers though, if there's extra expenses to your job, your employer shouldn't be expecting you to foot the bill.
I know that's not the reality, but that's where the liability really lies. Employers not renumerating their employee's correctly.
So for me that isn't a tax issue. It's the employers responsibility. Kinda the point of the employer/employee relationship is the simplicity. The employer should claiming against these things and supplying the employee.
I see operation divide and conquer is going well.
Pick a thread, pick any thread.....
😆
Well… I rarely contribute these days but thought I’d put in my tuppence…
As a self-employed person:
- I can’t/don’t deal in cash, my customers are SMEs
- My partner works for a living
- I am a limited cost trader providing professional services
- I don’t wish to drive a van or ride a motorbike
There are no meaningful tax reduction avenues available to me.
Creative accounting is a myth – if you want to skirt the bounds of the law, that’s your call – but I couldn’t sleep at night
I get paid a slightly higher day rate to compensate for the lack of employee benefits.
I work for 30-40 companies on small projects over the course of a year, being PAYE is not an option.
I offset the following against Tax:
- Mileage (45/25p)
- Home working - £18/month
- Software licences
- Insurance
- Hotel accommodation (when working)
- 50% mobile phone costs
When I purchase a £1500 laptop (for example), I do so out of my own operating income, it isn’t free, I don’t pay £1500 less tax, It costs me £1500 less the tax I would have paid on £1500 profit (say £500). So, the ‘free’ laptop actually costs me circa £1000 from my take home pay.
In short, I pay just as much tax as anyone, commensurate with the conditions in which I work.
“I have a mate who has a mate who is paid in cash, pays his wife a wage and rides a Ducati to work….”
Blurting out this nonsense as ‘the norm’ doesn’t help anyone, it simply isn’t representative.
Well said @MTT. Skimming through this thread, which has snowballed, shows a lot of hate for the self employed, based on stories of a mate of a mate, of a mate who works for cash, and 'he's loaded". The world isn't like that, I have an accountant who is straight down the line, as am I because we run business' that we want to continue and progress. Please remember also that the "gig economy" wasn't a choice of any employee, but of those way above making the serious money and also the same people avoiding their tax.
I work a mon to fri job but am just about to pick up some contract work on the occasional saturday. I used to do this work a few years ago as a Ltd company but not an option anymore.
Just had the projection through from the Umbrella company and its an equivalent 55k under IR35 or 70 ish outside IR35. In my limited understanding inside IR35 is basically treating it (and probably correctly so) as a PAYE salary situation in terms of tax etc.
I mean just looking at the numbers..... there seems to be a pretty massive difference between the two?
Having done this work before as a Ltd im fairly aware of the running costs, setup, insurances etc and even after all that it still works out signifcantly more profitable. I'm slightly at a loss to rationalise this with everyone saying theres very little benefit to being self employed?
If you are a company you aren't self employed
back to the original question. I think we are all going to get screwed, self-employed or not at the next budget.
unless your party donations are up to date of course.
I that point I think we can all agree!
We are pleased to advise you that following receipt of further information from partner organisations that was essential to us being able to authenticate your business, your application has now been accepted.
A payment of £4,000 to the bank account specified in your application will be processed within 2 working days.
From that newly self employed fund, got awarded.
Wee bit of good news at last, bring me back up to somewhere approaching last year, so fair play to the SG for going someway to covering up last years glaring errors.
My emails bugging my MSP, paid off. 😆