The Next Conservative Budget

[madbadger]

ralphrj said:

Vehicle Excise Duty changes:

Changes for cars registered after 1st April 2017.

Only cars with zero CO2 emissions will have zero VED.

First year rates vary according to VED. Cars emitting over 255g/km will pay £2,000 first year tax.

All cars irrespective of CO2 will pay £140 per year.

Premium cars (list price over £40k) will have to pay a supplementary VED of £310 per year for the first 5 years (i.e. £450 per year).

What happens to tax rates on older than 2017? Do they go to £140 or stay as they are? If the latter sounds like bad news for (decent) old cars.

[toohangry]

CaptainSlow said:

Corp Tax down 2% but Income Tax on dividends up 7.5%....and how long will it stay at 7.5%?

That's after the £5k allowance though right?

[KarlMac]

Megaflow said:

The VED changes seem quite sensible to me at first glance. The first year is done by co2, and varies from £0 to £2000. There after, everything is £140 a year, with a £310 premium supplement for cars costing over £40k. Applies to cars registered on or after 1st April 2017.

Does the previous system continue or do pre 2017 cars move onto the new system?

[jonah35]

This is best

https://www.gov.uk/government/uploads/system/uploa...

[Rutter]

KarlMac said:

Does the previous system continue or do pre 2017 cars move onto the new system?

Only new cars will be affected

[bobbylondonuk]

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

[Alex]

Another missed opportunity to scrap VED and replace it with a surcharge on fuel.

[CaptainSlow]

toohangry said:

That's after the £5k allowance though right?

Yes, my back of fag packet maths makes it about an extra grand for someone maxing out their standard rate allowance.

[PurpleMoonlight]

CaptainSlow said:

Yes, my back of fag packet maths makes it about an extra grand for someone maxing out their standard rate allowance.

Oh that's not to bad, I can live with that if I have to.

[Alex]

bobbylondonuk said:

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

Don't forget most Ltd company contractors charge VAT too. Include that and contractors contribute a higher percentage.

[jonah35]

bobbylondonuk said:

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

I've not understood this.

Currently dividends are taxed at 10% and then an additional 22.5%.

Are the new £5k tax free and the next bit at 7.5% not better than the 10%?

[MEC]

Alex said:

Don't forget most Ltd company contractors charge VAT too. Include that and contractors contribute a higher percentage.

The VAT doesn't contribute anything as the customer reclaims the VAT?

[MEC]

jonah35 said:

I've not understood this.

Currently dividends are taxed at 10% and then an additional 22.5%.

Are the new £5k tax free and the next bit at 7.5% not better than the 10%?

The 10% is notional and not paid by basic rate tax payers. The 7.5% will be a real payable tax by anyone taking > £5k in dividends......

[Eric Mc]

CaptainSlow said:

Eric Mc said:

CaptainSlow said:

hmmm...self employed paying via divis have been hit!!

Self employed people can't pay themselves using dividends.

Shareholders of a limited company receive dividends - sometimes.

Substance over form

What substance?

Running a business through a limited company does not magically turn you into an employee employed by yourself.

And, what's more, the tax treatments of genuine self employed/sole-trader individuals is very different to the tax treatment of people who remunerate themselves by salary/dividends from a company in which they are the main or only shareholder.

If you conflate the two concepts you cause confusion. They are distinct and separate in law and will always (hopefully) remain so.

[CaptainSlow]

jonah35 said:

I've not understood this.

Currently dividends are taxed at 10% and then an additional 22.5%.

Are the new £5k tax free and the next bit at 7.5% not better than the 10%?

No, because the 10% is already assumed to have been paid as a component of Corporation Tax so no additional needs to be paid.

One interesting point that needs to be further examined is the impact of no longer any grossing up to calculate whether the higher rate has been breached.

[Eric Mc]

bobbylondonuk said:

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

Where does this leave IR35?

With the tax take from small owner managed limited companies whether remuneration is through salary or dividend narrowing, the need for something like IR35 should diminish.

[jonah35]

CaptainSlow said:

jonah35 said:

I've not understood this.

Currently dividends are taxed at 10% and then an additional 22.5%.

Are the new £5k tax free and the next bit at 7.5% not better than the 10%?

No, because the 10% is already assumed to have been paid as a component of Corporation Tax so no additional needs to be paid.

One interesting point that needs to be further examined is the impact of no longer any grossing up to calculate whether the higher rate has been breached.

Thanks for clarification.

It would be interesting to see some examples.

[0000]

Eric Mc said:

Where does this leave IR35?

With the tax take from small owner managed limited companies whether remuneration is through salary or dividend narrowing, the need for something like IR35 should diminish.

Please, please, let them bin IR35.

[jonah35]

Eric Mc said:

bobbylondonuk said:

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

Where does this leave IR35?

With the tax take from small owner managed limited companies whether remuneration is through salary or dividend narrowing, the need for something like IR35 should diminish.

Contractors rather than employees can still offset expenses though.

Eg a bank worker who is an employee and the contractor that sits next to him.

One gets tax relief on driving to work, parking and so on, one doesn't.

[bobbylondonuk]

Eric Mc said:

bobbylondonuk said:

I think he accepts that contracting is a valueable method of employment that needs to be kept. But the tax rate gap needs to be closed. That is why you cannot get dividend tax credit up to 43k. you can only get 5k tax free and rest will be taxed at 7.5%. you cannot use the 11k against dividends...i think.

So it brings both types of employment closer together with a slightly lower tax rate for dividend only income to reflect the risk. That is a decent position in the current climate.

Where does this leave IR35?

With the tax take from small owner managed limited companies whether remuneration is through salary or dividend narrowing, the need for something like IR35 should diminish.

I suspect that is the aim. Why bother with IR35 if not for the differential tax rates? with Ltd co resources taking all the employee risks on themselves and being flexible for the economy, just adjust the tax take closer to employee tax rates. Problem solved!