2021 Budget Predictions

[ant1973]

red_slr said:

elanfan said:

I have personal knowledge of several friends who are self employed and they pay virtually no tax as their accountants somehow manage arrange it so. How about the self employed start paying their fair share would be a start!

A lot of self employed people do the following.

Pay themselves £12,500 PAYE. On this they pay no tax, small sum in NI.
Then take divi at 7.5% tax up to the basic rate limit.

Which is fine and dandy and leaves them with a personal tax bill of lets say a couple of grand for £40k income. Noiiiice.

BUT.

The bit these people forget to tell you is that they have to pay corporation tax at 19% on the profits for the divis. So lets say they made 30k profit and took as their divi they (their LTD) have to pay £5700 in tax.

So, 5700+2000 is £7700 in tax on lets say 40k income for round numbers. The same PAYE job on £40k a year you lose c.9k in deductions for tax and NI. So a grand total difference of £1300.

Another BUT.

The LTD guy has to pay his accountant to do his tax returns (ct and sa).
The LTD guy gets no free money via pension top up from his employer.
The LTD guy gets no pension tax credits (on payments from his LTD)
The LTD guy gets no paid holidays.
The LTD guy gets no sick pay.

Is it worth it...

Unless you are running a company thats making massive profits there really is not any major difference. If you are making larger profits then yes, you can stick £40k into a SIPP, pay yourself £50k. So total "income" of £90k but once you go over that the tax rates start to bite. So it can be a rock and hard place situation.

Honestly, having been self employed since 2003 the golden days of paying limited taxes are long gone.

The difference between being self-employed, divi's or employed is pretty marginal. It's all about the Employer's NI. Fix that, and the problem goes away.

There is a legitimate case for people taking risks to enjoy some degree of financial recognition in the tax system. But in these straightened times I doubt there is any appetite to acknowledge this.

I know lots of people who are self-employed\divis that would actually be better off being employees. Many small businesses are glorified job clubs and their owners are treated as useful idiots by the state. A good many would have easier lives if they employed fewer people as well.

The owners of most businesses have hardly been rewarded by the pandemic. That is often in sharp relief compared to the treatment of their employees.

We are going to need to create more jobs as a matter of urgency. I can see little incentive to do so at present.

Interesting times ahead.

[Flooble]

red_slr said:

elanfan said:

I have personal knowledge of several friends who are self employed and they pay virtually no tax as their accountants somehow manage arrange it so. How about the self employed start paying their fair share would be a start!

A lot of self employed people do the following.

Pay themselves £12,500 PAYE. On this they pay no tax, small sum in NI.
Then take divi at 7.5% tax up to the basic rate limit.

Which is fine and dandy and leaves them with a personal tax bill of lets say a couple of grand for £40k income. Noiiiice.

BUT.

The bit these people forget to tell you is that they have to pay corporation tax at 19% on the profits for the divis. So lets say they made 30k profit and took as their divi they (their LTD) have to pay £5700 in tax.

So, 5700+2000 is £7700 in tax on lets say 40k income for round numbers. The same PAYE job on £40k a year you lose c.9k in deductions for tax and NI. So a grand total difference of £1300.

Another BUT.

The LTD guy has to pay his accountant to do his tax returns (ct and sa).
The LTD guy gets no free money via pension top up from his employer.
The LTD guy gets no pension tax credits (on payments from his LTD)
The LTD guy gets no paid holidays.
The LTD guy gets no sick pay.

Is it worth it...

Unless you are running a company thats making massive profits there really is not any major difference. If you are making larger profits then yes, you can stick £40k into a SIPP, pay yourself £50k. So total "income" of £90k but once you go over that the tax rates start to bite. So it can be a rock and hard place situation.

Honestly, having been self employed since 2003 the golden days of paying limited taxes are long gone.

To be fair, often they also "employ" their spouse so they actually take 2 x 12.5K as salary and 2x40K as dividends as well as doing a "salary sacrifice"(*) arrangement on the pension (another 2x40k). Hence they could in theory take £185K a year and feel like they were "not paying any tax", depending on how their accountant described the arrangements to them.

(*) I can't remember if you can still do this or not.

[Shnozz]

ant1973 said:

red_slr said:

elanfan said:

I have personal knowledge of several friends who are self employed and they pay virtually no tax as their accountants somehow manage arrange it so. How about the self employed start paying their fair share would be a start!

A lot of self employed people do the following.

Pay themselves £12,500 PAYE. On this they pay no tax, small sum in NI.
Then take divi at 7.5% tax up to the basic rate limit.

Which is fine and dandy and leaves them with a personal tax bill of lets say a couple of grand for £40k income. Noiiiice.

BUT.

The bit these people forget to tell you is that they have to pay corporation tax at 19% on the profits for the divis. So lets say they made 30k profit and took as their divi they (their LTD) have to pay £5700 in tax.

So, 5700+2000 is £7700 in tax on lets say 40k income for round numbers. The same PAYE job on £40k a year you lose c.9k in deductions for tax and NI. So a grand total difference of £1300.

Another BUT.

The LTD guy has to pay his accountant to do his tax returns (ct and sa).
The LTD guy gets no free money via pension top up from his employer.
The LTD guy gets no pension tax credits (on payments from his LTD)
The LTD guy gets no paid holidays.
The LTD guy gets no sick pay.

Is it worth it...

Unless you are running a company thats making massive profits there really is not any major difference. If you are making larger profits then yes, you can stick £40k into a SIPP, pay yourself £50k. So total "income" of £90k but once you go over that the tax rates start to bite. So it can be a rock and hard place situation.

Honestly, having been self employed since 2003 the golden days of paying limited taxes are long gone.

The difference between being self-employed, divi's or employed is pretty marginal. It's all about the Employer's NI. Fix that, and the problem goes away.

There is a legitimate case for people taking risks to enjoy some degree of financial recognition in the tax system. But in these straightened times I doubt there is any appetite to acknowledge this.

I know lots of people who are self-employed\divis that would actually be better off being employees. Many small businesses are glorified job clubs and their owners are treated as useful idiots by the state. A good many would have easier lives if they employed fewer people as well.

The owners of most businesses have hardly been rewarded by the pandemic. That is often in sharp relief compared to the treatment of their employees.

We are going to need to create more jobs as a matter of urgency. I can see little incentive to do so at present.

Interesting times ahead.

Spot on.

However, the general disdain (together with an ignorance as to what taxes are payable) shown by many PAYE towards small business owners is such that it seems if the government were to penalise small businesses it would be a vote-winner more than loser.

[ant1973]

Shnozz said:

ant1973 said:

red_slr said:

elanfan said:

I have personal knowledge of several friends who are self employed and they pay virtually no tax as their accountants somehow manage arrange it so. How about the self employed start paying their fair share would be a start!

A lot of self employed people do the following.

Pay themselves £12,500 PAYE. On this they pay no tax, small sum in NI.
Then take divi at 7.5% tax up to the basic rate limit.

Which is fine and dandy and leaves them with a personal tax bill of lets say a couple of grand for £40k income. Noiiiice.

BUT.

The bit these people forget to tell you is that they have to pay corporation tax at 19% on the profits for the divis. So lets say they made 30k profit and took as their divi they (their LTD) have to pay £5700 in tax.

So, 5700+2000 is £7700 in tax on lets say 40k income for round numbers. The same PAYE job on £40k a year you lose c.9k in deductions for tax and NI. So a grand total difference of £1300.

Another BUT.

The LTD guy has to pay his accountant to do his tax returns (ct and sa).
The LTD guy gets no free money via pension top up from his employer.
The LTD guy gets no pension tax credits (on payments from his LTD)
The LTD guy gets no paid holidays.
The LTD guy gets no sick pay.

Is it worth it...

Unless you are running a company thats making massive profits there really is not any major difference. If you are making larger profits then yes, you can stick £40k into a SIPP, pay yourself £50k. So total "income" of £90k but once you go over that the tax rates start to bite. So it can be a rock and hard place situation.

Honestly, having been self employed since 2003 the golden days of paying limited taxes are long gone.

The difference between being self-employed, divi's or employed is pretty marginal. It's all about the Employer's NI. Fix that, and the problem goes away.

There is a legitimate case for people taking risks to enjoy some degree of financial recognition in the tax system. But in these straightened times I doubt there is any appetite to acknowledge this.

I know lots of people who are self-employed\divis that would actually be better off being employees. Many small businesses are glorified job clubs and their owners are treated as useful idiots by the state. A good many would have easier lives if they employed fewer people as well.

The owners of most businesses have hardly been rewarded by the pandemic. That is often in sharp relief compared to the treatment of their employees.

We are going to need to create more jobs as a matter of urgency. I can see little incentive to do so at present.

Interesting times ahead.

Spot on.

However, the general disdain (together with an ignorance as to what taxes are payable) shown by many PAYE towards small business owners is such that it seems if the government were to penalise small businesses it would be a vote-winner more than loser.

There has been a prevailing anti-business culture since the 2008 crash. I think you are correct that taxing the business community more is a vote winner. The cabinet is comprised of people who have no meaningful experience in industry and have little empathy for the burdens of running a small or medium sized business. The treatment of many business people in the pandemic will come back to bite the Tories in the fullness of time as many of those who they have pissed off are their natural supporters.

I fully expect that corporation taxes will rise.

I think the time is also right to do away with the whole NI\Income tax dichotomy which has been a nonsense for a long time. It should simply be merged into the tax rates as Employer's NI disincentives employment in general. By doing this the burden is shared by everyone. The legal status of a business should not determine tax take all other things being equal.

[ant1973]

Flooble said:

To be fair, often they also "employ" their spouse so they actually take 2 x 12.5K as salary and 2x40K as dividends as well as doing a "salary sacrifice"(*) arrangement on the pension (another 2x40k). Hence they could in theory take £185K a year and feel like they were "not paying any tax", depending on how their accountant described the arrangements to them.

(*) I can't remember if you can still do this or not.

You only obtain relief at the rate at which tax is paid. In owner managed businesses, the company will usually make the contribution and obtain CT relief. Which is exactly what any employer would do as well... Any employee could put £40k into their pension and also enjoy the same benefit as you have identified.

Income shifting is also against the law so it is a bit of a strawman to identify that as a benefit of running your own business. The revenue are far from daft when it comes to these matters...

Finally, you overlook the fact that dividends are paid post tax. So add back the 19% CT rate and you will find that the people in question are paying the same rates as, err, an employee.

As I said above, Employer's NI is the real elephant in the room.

[anonymous-user]

ant1973 said:

There has been a prevailing anti-business culture since the 2008 crash. I think you are correct that taxing the business community more is a vote winner. The cabinet is comprised of people who have no meaningful experience in industry and have little empathy for the burdens of running a small or medium sized business. The treatment of many business people in the pandemic will come back to bite the Tories in the fullness of time as many of those who they have pissed off are their natural supporters.

I fully expect that corporation taxes will rise.

I think the time is also right to do away with the whole NI\Income tax dichotomy which has been a nonsense for a long time. It should simply be merged into the tax rates as Employer's NI disincentives employment in general. By doing this the burden is shared by everyone. The legal status of a business should not determine tax take all other things being equal.

Yet the irony is the reason we have to raise taxes is to pay for a debt incurred by keeping small businesses and their employees afloat. Seems only right they shoulder some of the burden to pay it back.

[ant1973]

wormus said:

ant1973 said:

There has been a prevailing anti-business culture since the 2008 crash. I think you are correct that taxing the business community more is a vote winner. The cabinet is comprised of people who have no meaningful experience in industry and have little empathy for the burdens of running a small or medium sized business. The treatment of many business people in the pandemic will come back to bite the Tories in the fullness of time as many of those who they have pissed off are their natural supporters.

I fully expect that corporation taxes will rise.

I think the time is also right to do away with the whole NI\Income tax dichotomy which has been a nonsense for a long time. It should simply be merged into the tax rates as Employer's NI disincentives employment in general. By doing this the burden is shared by everyone. The legal status of a business should not determine tax take all other things being equal.

Yet the irony is the reason we have to raise taxes is to pay for a debt incurred by keeping small businesses and their employees afloat. Seems only right they shoulder some of the burden to pay it back.

I think that is perhaps the wrong way to look at matters. Furlough largely benefits employees. Employees would simply have been made redundant in the absence of furlough. That would be in the nature of a one off cost. The state would then have had upwards of 9m (at peak) to fund and thereafter find jobs for. Most businesses would simply have mothballed. Furlough avoided redundancy costs and that's it. I would say that is a scoring draw between state and business.

The business grant and rates relief has been the only real cash benefit that has been obtained by owners. Everything else has been debt.

[Welshbeef]

ant1973 said:

I think that is perhaps the wrong way to look at matters. Furlough largely benefits employees. Employees would simply have been made redundant in the absence of furlough. That would be in the nature of a one off cost. The state would then have had upwards of 9m (at peak) to fund and thereafter find jobs for. Most businesses would simply have mothballed. Furlough avoided redundancy costs and that's it. I would say that is a scoring draw between state and business.

The business grant and rates relief has been the only real cash benefit that has been obtained by owners. Everything else has been debt.

But with that logic you’d then only put a special extra tax on those people who were furloughed.

I cannot see that working and very generally it’s the poorer who would be hit hardest (again).

We’re all in it together companies, staff who were never furloughed, furloughed staff, self employed. I see no point in stating one group over another should pay.
I think we should instead put this covid debt as a debt in the country into perpetuity and we simply service the debt interest / or agree it’s a cost to be paid back over 50/100/150/200 years and issue the bonds accordingly.

[survivalist]

wormus said:

ant1973 said:

There has been a prevailing anti-business culture since the 2008 crash. I think you are correct that taxing the business community more is a vote winner. The cabinet is comprised of people who have no meaningful experience in industry and have little empathy for the burdens of running a small or medium sized business. The treatment of many business people in the pandemic will come back to bite the Tories in the fullness of time as many of those who they have pissed off are their natural supporters.

I fully expect that corporation taxes will rise.

I think the time is also right to do away with the whole NI\Income tax dichotomy which has been a nonsense for a long time. It should simply be merged into the tax rates as Employer's NI disincentives employment in general. By doing this the burden is shared by everyone. The legal status of a business should not determine tax take all other things being equal.

Yet the irony is the reason we have to raise taxes is to pay for a debt incurred by keeping small businesses and their employees afloat. Seems only right they shoulder some of the burden to pay it back.

Pretty sure some huge firms (Nissan, Arcadia etc) used furlough and ,given the number they employ, i doubt the bill was small. Is there any data to back up that small businesses and their employees benefitted disproportionately?

[Previous]

I'd like to see an online sales levy. Yes, its be the consumer who pays, but isn't that ultimately the case for any tax?

Perhaps a rebate for the above for uk based bricks and mortar.... but that won't happen.

Probably the only way to get amazon and the like paying anywhere near reasonable amounts.

Reduction in higher rate pension relief: I hope they don't do this, if they do they've lost my vote next time around on this alone.

The latter i saw being discussed on a number of news sites, so almost certainly a leak and gauge the reaction approach.

Stamp duty cut extended

Help to buy expansion in some way?

[Welshbeef]

Previous said:

I'd like to see an online sales levy. Yes, its be the consumer who pays, but isn't that ultimately the case for any tax?

Perhaps a rebate for the above for uk based bricks and mortar.... but that won't happen.

Probably the only way to get amazon and the like paying anywhere near reasonable amounts.

Reduction in higher rate pension relief: I hope they don't do this, if they do they've lost my vote next time around on this alone.

The latter i saw being discussed on a number of news sites, so almost certainly a leak and gauge the reaction approach.

Stamp duty cut extended

Help to buy expansion in some way?

You do know Labour and libs will do the removal of higher rate pension tax relief? Bizarre to then vote for a political party who will tax you higher but hey ho

[ant1973]

Welshbeef said:

ant1973 said:

I think that is perhaps the wrong way to look at matters. Furlough largely benefits employees. Employees would simply have been made redundant in the absence of furlough. That would be in the nature of a one off cost. The state would then have had upwards of 9m (at peak) to fund and thereafter find jobs for. Most businesses would simply have mothballed. Furlough avoided redundancy costs and that's it. I would say that is a scoring draw between state and business.

The business grant and rates relief has been the only real cash benefit that has been obtained by owners. Everything else has been debt.

But with that logic you’d then only put a special extra tax on those people who were furloughed.

I cannot see that working and very generally it’s the poorer who would be hit hardest (again).

We’re all in it together companies, staff who were never furloughed, furloughed staff, self employed. I see no point in stating one group over another should pay.
I think we should instead put this covid debt as a debt in the country into perpetuity and we simply service the debt interest / or agree it’s a cost to be paid back over 50/100/150/200 years and issue the bonds accordingly.

I don't advocate taxing business more at all. All of this year's debt has been QE'd. It's when that party stops we will have a problem.

You might take the view that older people should pay more tax since arguably lockdown was done to protect them. But it's not exactly edifying, far less a vote winner!

An ageing population and stalling productivity growth mean higher taxes, I suspect. We are as well to face up that, I think.

[Biggy Stardust]

Welshbeef said:

But with that logic you’d then only put a special extra tax on those people who were furloughed.

I cannot see that working and very generally it’s the poorer who would be hit hardest (again).

Those who got money out should be made to pay it back in over a period of time? Maybe those talking about 'fair' might consider this to be acceptable.

[Welshbeef]

Biggy Stardust said:

Those who got money out should be made to pay it back in over a period of time? Maybe those talking about 'fair' might consider this to be acceptable.

I’m not sure how someone on Min wage, & let’s say always will be how could they pay anything back they are sadly just surviving.

It will be a full years salary for many no idea how they can pay that back.
Same could be said for universal credit

[Biggy Stardust]

Welshbeef said:

Biggy Stardust said:

Those who got money out should be made to pay it back in over a period of time? Maybe those talking about 'fair' might consider this to be acceptable.

I’m not sure how someone on Min wage, & let’s say always will be how could they pay anything back they are sadly just surviving.

It will be a full years salary for many no idea how they can pay that back.
Same could be said for universal credit

Some meaningful community work for those who genuinely can't pay would focus the minds of those who could but don't really fancy it. They've had money, let them do something in return for it. I don't see that as particularly harsh.

[brickwall]

The other thing to remember is this is a Tory government, 3 years away from an election. Neither Labour nor SNP will fight tax rises anywhere near as much as they’ll fight spending cuts. (And neither do they have the credibility to say “vote for us instead and we’ll lower your taxes).

If there’s ever a politically “safe” time to raise taxes, it’s now.

[nammynake]

vulture1 said:

You know why they do that.

People moving homes hire vans, buy new furniture to match, which will need new curtains. and our blue towels don't match this yellow bathroom. etc

I’m not doubting the side effect but the reality is house prices have increased further during this recession, making it more difficult for first time buyers and home movers.

[Crippo]

I think the pain will come in the November announcement. The March Budget will be delivered when we are still in lockdown and many businesses are still closed. I just don’t see how he can stand up and start announcing big tax rises before the economy is even fully operational.

[Welshbeef]

I think we will see the time frame when he predicts the budget will be balanced.


How we deal with the overhand from the financial crash and now C19 is totally unknown. Even someone leaving school today and no other crashes in their lifetime this debt still wouldn’t be paid off so anyone 40-50’s you’ll be long dead before this is paid for long dead.

[Jockman]

red_slr said:

elanfan said:

I have personal knowledge of several friends who are self employed and they pay virtually no tax as their accountants somehow manage arrange it so. How about the self employed start paying their fair share would be a start!

A lot of self employed people do the following.

Pay themselves £12,500 PAYE. On this they pay no tax, small sum in NI.
Then take divi at 7.5% tax up to the basic rate limit.

Which is fine and dandy and leaves them with a personal tax bill of lets say a couple of grand for £40k income. Noiiiice.

BUT.

The bit these people forget to tell you is that they have to pay corporation tax at 19% on the profits for the divis. So lets say they made 30k profit and took as their divi they (their LTD) have to pay £5700 in tax.

So, 5700+2000 is £7700 in tax on lets say 40k income for round numbers. The same PAYE job on £40k a year you lose c.9k in deductions for tax and NI. So a grand total difference of £1300.

Another BUT.

The LTD guy has to pay his accountant to do his tax returns (ct and sa).
The LTD guy gets no free money via pension top up from his employer.
The LTD guy gets no pension tax credits (on payments from his LTD)
The LTD guy gets no paid holidays.
The LTD guy gets no sick pay.

Is it worth it...

Unless you are running a company thats making massive profits there really is not any major difference. If you are making larger profits then yes, you can stick £40k into a SIPP, pay yourself £50k. So total "income" of £90k but once you go over that the tax rates start to bite. So it can be a rock and hard place situation.

Honestly, having been self employed since 2003 the golden days of paying limited taxes are long gone.

Good but confusing post. No mention of employer NI saving but on the whole the advantage of ltd status has indeed been eroded as you say.

The £40k SIPP contribution doesn’t get added to your income. It is an employer contribution.