Budget: Tax free dividends down to £2000 from £5000
Discussion
Terminator X said:
Allegedly it's because Corp Tax rates are on a downward trend eg greater profit within the business but taxed more when accessed. I'd be interested to hear if anyone can work out one vs the other to see if us powerfully built directors are actually better off or not!
TX.
It was getting borderline even with the £5000 allowance. So that's going to be an extra 7.5% tax on that £3k, which is another £225 per year to find.TX.
Terminator X said:
Allegedly it's because Corp Tax rates are on a downward trend eg greater profit within the business but taxed more when accessed. I'd be interested to hear if anyone can work out one vs the other to see if us powerfully built directors are actually better off or not!
TX.
For £10,000 gross profit with net paid to shareholder on basic rate tax:TX.
Last tax year the Government got £2000
This year the Government will get £2225
Next tax year the Government will get £2132
2018 the Government will get £2282
DELETED: Comment made by a member who's account has been deleted.
This. I'm getting so fed up with the constant hammering of the business/entrepreneur man in the street just trying to get on in life.This is the symptom of not having a strong opposition ie any opposition in parliament.
They are going after their own as they know we have no alternative.
CaptainSensib1e said:
Playing devils advocate, dividends are still much more tax-efficient than earned income, the gap is just reducing. Overall, I do agree with the sentiment of equalising taxation accross all income sources, otherwise you just create a system that is ripe for abuse.
There needs to be a reward for creating businesses and jobs. If there is a level playing field why take the risk?PurpleMoonlight said:
There needs to be a reward for creating businesses and jobs. If there is a level playing field why take the risk?
This... also many companies enjoy the flexability of contractors and if tax was lewvel that flexability would not be there as fewer poeple would take the rick of contracting if the reward was similar to being permenant. When you think you are getting a win with Corporation tax coming down over a number of years a change like this just counteracts it.
Edited by stuno1 on Wednesday 8th March 17:37
Edited by stuno1 on Wednesday 8th March 19:13
PurpleMoonlight said:
There needs to be a reward for creating businesses and jobs. If there is a level playing field why take the risk?
A company will also have a capital value, so you can pay yourself an income, but also own an asset that could become very valuable if you make a success of the business - that's you incentive. Look at Mark Zuckerberg, do you think he cares more about what rate his income is taxed at, or that Facebook is worth $300m+?
CaptainSensib1e said:
PurpleMoonlight said:
There needs to be a reward for creating businesses and jobs. If there is a level playing field why take the risk?
A company will also have a capital value, so you can pay yourself an income, but also own an asset that could become very valuable if you make a success of the business - that's you incentive. Look at Mark Zuckerberg, do you think he cares more about what rate his income is taxed at, or that Facebook is worth $300m+?
Not everyone can or even wants to set up a 300m + company.
Time and time again it's the same government pro quo of abuse the person you can and ignore the person you can't.
XMT said:
Think there's a huge different between that level of company and running a day to day business with approx 1m t/o.
Not everyone can or even wants to set up a 300m + company.
Yes, of course.Not everyone can or even wants to set up a 300m + company.
But the point stands that if you own a business, the business itself has a value. And that value can be a significant part of your reward for taking the risk and starting the business.
CaptainSensib1e said:
A company will also have a capital value, so you can pay yourself an income, but also own an asset that could become very valuable if you make a success of the business - that's you incentive.
DELETED: Comment made by a member who's account has been deleted.From my point of view on of the few perks of taking the risk, extra pain, time out to run your own place, not having protection that you would in a paye job, sick pay, pension schemes, redundancy pay etc etc is the slight tax benefit you get by working for yourself and now they take that away too.
Then they wonder why so many try to rip off the system. Take a bloody guess.
In a world where you do to some extent have to compete on a global level, rising taxes at a time when overall confidence, the economy, retail, gbp stability is poor and slow is quite a show of disregard.
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ker PurpleMoonlight said:
There needs to be a reward for creating businesses and jobs. If there is a level playing field why take the risk?
Funnily enough I have never met anyone who set up a company due it being just a tax efficient vehicle. I deal with lots of companies and in 1 to 4m turnover range and none of the owners set them up for tax efficiency purposes. There is a satisfaction in being their own boss; entrepreneurial spirit and the belief that they can grow the company.You obviously haven't met a lot of companies then. There are many, many personal service companies out there set up purely because of the differing tax treatment and employment regulations.
If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
Eric Mc said:
You obviously haven't met a lot of companies then. There are many, many personal service companies out there set up purely because of the differing tax treatment and employment regulations.
If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
I don't mind admitting that the difference in tax was the only reason for my company rather than running my business as a sole trader. When I started the business 12/13 years ago it was a no-brainer. I've had a fair crack of the whip over those years I suppose. I don't think there's a great deal in it now when you think about the extra accountants fees I pay for creating company accounts and payroll.If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
Eric Mc said:
You obviously haven't met a lot of companies then. There are many, many personal service companies out there set up purely because of the differing tax treatment and employment regulations.
If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
I suspect must personal services companies don't turn over 1-4 million. It seems to me that PSC's are the very companies that are being targeted.If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
Eric Mc said:
If the rules surrounding these areas were streamlined and made the same for everybody, then many "one man band" limited companies would simply be closed down.
I own one such company, but I'm not sure about how I feel regarding today's budget.On the one hand I agree with the simplicity and fairness of levelling the tax/NI contributions I pay with a typical employee. The incentive the Government should give us is to build the business, not just to pay ourselves, so as long as Corporation Tax is at a level where there is encouragement to leave money in the business to build funds to employ staff, or invest in new technologies, then I can understand and accept that on some level.
I have had some staff in the past but found it easier to step back and just look after myself eventually, maybe with the right incentives I would have preferred to keep it going?
The risk issue (continuous work, sick pay, holiday pay) is also a grey area for me. Should I expect to be rewarded for my risk? To be honest, in my job I am earning more as a one-man-band than I ever could do as an employee simply by virtue of cutting out the middle man (the employer) and dealing direct with the client. That is my 'reward' and perhaps the risk should perhaps just be my own?
Obviously if you're a one-man-band going through an agency/umbrella etc, so not dealing direct with the client and presumably not charging the same rates yourself, then perhaps it's a different story. But as with IR35, it would seem this is precisely the type of setup that the government wants to discourage. I don't know why or agree with it, because ofcourse I started out that way before I progressed to dealing directly with clients, so it's a valuable stepping stone.
I suppose my biggest bugbear is the lack of clear communication from the Government of what they do want to encourage and what they want to discourage. It would be far easier for everyone to plan their business/life if they knew what the intentions were, rather than having to react to the annual changes which often seem so incoherent.
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