Contractors: IR35 & general discussion

[Guvernator]

768 said:

I saw a post in NP&E in the last week from someone confused about why anyone would be against corporation tax rises, asking if there was any possible downside to increasing it. At least they asked the question I suppose.

Unfortunately your normal PAYE drone is usually quite ignorant to the workings of any business. I was certainly less than well informed when I was a permie.

To the man on the street, corporation tax sounds like something the big firms should be paying, most probably don't even realise that pretty much every business including your small local family run businesses have to pay it. Not sure they'd be so keen on the rises if they realised that.

[Countdown]

Guvernator said:

Unfortunately your normal PAYE drone is usually quite ignorant to the workings of any business. I was certainly less than well informed when I was a permie.

To the man on the street, corporation tax sounds like something the big firms should be paying, most probably don't even realise that pretty much every business including your small local family run businesses have to pay it. Not sure they'd be so keen on the rises if they realised that.

Possibly me being pedantic but it's not every business that pays CT, It's every incorporated business. Most small businesses (ie one man band/partnerhsips) aren't incorporated, they're more likely to be sole trader/self employed rather than Ltd .

[cb31]

Clockwork Cupcake said:

Sorry, are you suggesting that anyone at HMRC has any interest* in making tax sensible and simple, other than the scenario I mentioned earlier?

(* - no pun intended)

edit: Presumably tapering eases the same choke points that Stamp Duty used to have before it was tapered, and encourages compliance (since there is less incentive to artificially stay below the threshold when you are just over it)

Edited by Clockwork Cupcake on Monday 17th October 19:53

It's a bit of a con to make it look like only big boys get caught at 25% and that small people only slightly over £50k you will be paying just over 19% as currently. I did some calculations months ago and it seemed to ramp up very quickly after you are above £50k and then slow down the nearer you get to £250k. It is in no way linear but the headlines make it sound like that, it is a large tax hike.

[robinessex]

Isn't it a valid argument to suggest the introduce of a single rate of tax for everyone/eveything? Would make it easier, therefore less expensive to administer all around.

[Blown2CV]

Pit Pony said:

Clockwork Cupcake said:

SWoll said:

Just don't read the associated payslip. I weep every month for a minute or two.

Well, quite.

Especially as it itemises both Employer and Employee deductions, the former of which is something that actual employees don't usually see.

I think a lot of employees don't realise just how much tax is paid on their behalf by their employers. And, if they do, they think it isn't anything to do with them and comes off some magic money tree that their employer grows or something.

Went permie in August 2021.

My permie pay slip includes a line showing employer Ni, and because I salary sacrifice £15k into pension on top of their contributions, another line showing how much Of their Ni they have added to my pension.

Unfortunately I'm finding that the net isn't enough* to live on.

• To live like I did before covid

not sure why a permie payslip shows employer NI

[Zero7]

I think I just need a bloody good accountant that is not lazy... open to any recommendations

[robinessex]

Solved the single rate tax idea with this formula:-



Simple eh?

[Pit Pony]

Blown2CV said:

Pit Pony said:

Clockwork Cupcake said:

SWoll said:

Just don't read the associated payslip. I weep every month for a minute or two.

Well, quite.

Especially as it itemises both Employer and Employee deductions, the former of which is something that actual employees don't usually see.

I think a lot of employees don't realise just how much tax is paid on their behalf by their employers. And, if they do, they think it isn't anything to do with them and comes off some magic money tree that their employer grows or something.

Went permie in August 2021.

My permie pay slip includes a line showing employer Ni, and because I salary sacrifice £15k into pension on top of their contributions, another line showing how much Of their Ni they have added to my pension.

Unfortunately I'm finding that the net isn't enough* to live on.

• To live like I did before covid

not sure why a permie payslip shows employer NI

I didn't ask why, but I think most employees don't realise the additional costs of their employment, so maybe they thought it might be of interest.

My role is in manufacturing improvement, and i once said ". So if we have 5 operators and there's a 10 minute changeover that's 50 mins. Shall we call that £50?" If its 15 mins its £75. Nobody (even production managers) could get their head around the fact that if we are allocating all Business costs and indirect work on the number of direct operator hours, the cost is at least 4 times the hourly rate. It has to be £1 a minute.
The finance manager understood. And that was it.

[Sheepshanks]

robinessex said:

Isn't it a valid argument to suggest the introduce of a single rate of tax for everyone/eveything? Would make it easier, therefore less expensive to administer all around.

They nearly did this in Australia until, quite late in the day, they realised that most people would be worse off and rich people would be massively better off.

[Clockwork Cupcake]

Sheepshanks said:

robinessex said:

Isn't it a valid argument to suggest the introduce of a single rate of tax for everyone/eveything? Would make it easier, therefore less expensive to administer all around.

They nearly did this in Australia until, quite late in the day, they realised that most people would be worse off and rich people would be massively better off.

To a lesser extent, that was the idea of the Poll Tax in the UK. Everyone paying the same for the same services.

Didn't prove to be a very popular idea with the masses, as I recall

[Guvernator]

Countdown said:

Possibly me being pedantic but it's not every business that pays CT, It's every incorporated business. Most small businesses (ie one man band/partnerhsips) aren't incorporated, they're more likely to be sole trader/self employed rather than Ltd .

Yep I'm aware not every business is a Ltd, my point was that a lot of people probably aren't aware that the 25% corp tax hike impacts a lot more businesses than just mega corps, in fact it probably won't impact big business at all as all of their head offices are offshore anyway, it will be the small to medium businesses that are hardest hit by the hike.

A lot of the rhetoric around Truss's mini budget was that it wasn't "fair", those powerfully built directors deserve everything they had coming after all.

I have a friend who runs a small local steel fabrication company, employs 7 or 8 people. Corp Tax hike, energy costs, interest hikes, he has genuine concerns about being able to keep his business running next year. This isn't a unique scenario either, we are gonna see a lot of small businesses go to the wall next year.

[Countdown]

Guvernator said:

Yep I'm aware not every business is a Ltd, my point was that a lot of people probably aren't aware that the 25% corp tax hike impacts a lot more businesses than just mega corps, in fact it probably won't impact big business at all as all of their head offices are offshore anyway, it will be the small to medium businesses that are hardest hit by the hike.

A lot of the rhetoric around Truss's mini budget was that it wasn't "fair", those powerfully built directors deserve everything they had coming after all.

I have a friend who runs a small local steel fabrication company, employs 7 or 8 people. Corp Tax hike, energy costs, interest hikes, he has genuine concerns about being able to keep his business running next year. This isn't a unique scenario either, we are gonna see a lot of small businesses go to the wall next year.

The issues that you highlight affect all businesses, regardless of whether theyre big, small, incorporated or not. The increased rate of CT will NOT be a factor in firms going to the wall. It's only payable on profits.

Also just to clarify the 25% top rate of CT will only apply to firms making profits of £250k per annum (after all costs). The new rates are a sliding scale from 19% to 25% for profits from £50k - £250k. Even if he does pay the top rate of 25% CT and 7.5% DT your friend will have paid less tax/NI than somebody who is PAYE.

[cb31]

Countdown said:

Also just to clarify the 25% top rate of CT will only apply to firms making profits of £250k per annum (after all costs). The new rates are a sliding scale from 19% to 25% for profits from £50k - £250k. Even if he does pay the top rate of 25% CT and 7.5% DT your friend will have paid less tax/NI than somebody who is PAYE.

Bit of a loaded sliding scale though, have a look at this. It ramps up quickly, earn £100k and you are nearly at 23%

Proft 2022 2022 2023 2023
£50,000 £9,500 19% £9,500 19.0%
£75,000 £14,250 19% £16,125 21.5%
£100,000 £19,000 19% £22,750 22.8%
£125,000 £23,750 19% £29,375 23.5%
£150,000 £28,500 19% £36,000 24.0%
£175,000 £33,250 19% £42,625 24.4%
£200,000 £38,000 19% £49,250 24.6%
£225,000 £42,750 19% £55,875 24.8%
£250,000 £47,500 19% £62,500 25.0%

[robinessex]

Sheepshanks said:

robinessex said:

Isn't it a valid argument to suggest the introduce of a single rate of tax for everyone/eveything? Would make it easier, therefore less expensive to administer all around.

They nearly did this in Australia until, quite late in the day, they realised that most people would be worse off and rich people would be massively better off.

Cut the pay for the rich then.

[Olivera]

How's everyone faring of late in the contracting world?

[SamR380]

Almost a year into my current contract. Usually I start getting itchy feet by now but I'm learning a lot and this is the most demonstrably "outside IR35" gig I've had. I might stick around a while longer.

Anyone else notice the amount of jobs advertised as 'outside' has increased? I work in engineering rather than IT.

[768]

I've never had an issue getting outside roles in my corner, but I think I'm done this time. One more month and then I'm going to become a postman or turn some bowls in a shed or something.

[Olivera]

Currently working 'inside' here. Outside is obviously still preferable but corporation tax rates are going up in the new tax year and the dividend tax free allowance is getting a further chop, so the tax incentives are reducing.

[Deep Thought]

Olivera said:

How's everyone faring of late in the contracting world?

In contract now, inside IR35, day rate that compensates for it, and bumping a load in to the pension monthly to offset the taxation.

Havent really found there to be a shortage of work either, even in my niche.

Last contracted ended and the next one started the following day.

Current role "should" extend ok too. Looks like maybe an 12-18 month project from this point.

[SamR380]

Olivera said:

Currently working 'inside' here. Outside is obviously still preferable but corporation tax rates are going up in the new tax year and the dividend tax free allowance is getting a further chop, so the tax incentives are reducing.

Do you not do a lot of travelling and overnight stays with your work? Claiming mileage and hotels is a major advantage to being 'outside' for me, I could only consider an inside job if it was very local.