Budgetamania 2018

[TheRemainsOfTheDave]

And someone on £40,000 pays about £8,000 in tax and NI, whereas someone with their own business who pays themselves £18,000 in income and £22,000 in dividends, pays only £3k. Not to mention the fact that they bought their van and whatever else as a business expense, and maybe put another few thousand in their pocket as cash never seen by the taxman at all.

They would pay 7% dividend tax (apart for a small untaxed band - 3k?) and 19% corporation tax even before then being assessed for income tax.
They usually can only buy vehicles if it's critical to their business, but can claim mileage allowances. There's no way they would get away with squirreling money out of the business, these days.
Anyway, if they're paying £18k salary and £22k dividends, they need to change their accountant!

 

[Chippy_boy]

They would pay 7% dividend tax (apart for a small untaxed band - 3k?) and 19% corporation tax even before then being assessed for income tax.
They usually can only buy vehicles if it's critical to their business, but can claim mileage allowances. There's no way they would get away with squirreling money out of the business, these days.

They'd pay 7.5% of the 17k, i.e. £1,300. Of the £18k income, £11k of that is tax free, so they'd pay 20% of £7k, which is another £1,400.

Anyway, if they're paying £18k salary and £22k dividends, they need to change their accountant!

Precisely my point! They'd arrange their affairs to pay even less, whereas the poor sod on PAYE has no such option.

 

[TheRemainsOfTheDave]

They'd pay 7.5% of the 17k, i.e. £1,300. Of the £18k income, £11k of that is tax free, so they'd pay 20% of £7k, which is another £1,400.

Precisely my point! They'd arrange their affairs to pay even less, whereas the poor sod on PAYE has no such option.

Yeah, but they've already paid 19% CT before they pay salary and dividends. To get £40k out, they need to put about £49k in the business and pay £9k CT first.
Trust me, unless you're being very devious you cannot screw the system easily. There's probably more to be earned, I agree, but then the business is taking more risk. You're making it sound like tax avoidance and it's not.

 

[Chippy_boy]

Yeah, but they've already paid 19% CT before they pay salary and dividends. To get £40k out, they need to put about £49k in the business and pay £9k CT first.
Trust me, unless you're being very devious you cannot screw the system easily. There's probably more to be earned, I agree, but then the business is taking more risk. You're making it sound like tax avoidance and it's not.

You pay CT on profits. So you make no profits, then how much CT do you pay?

I make it sound like tax avoidance when absolutely that's what it is. Small businesses and self-employed people all over the show, do exactly this sort of thing to avoid paying tax. You even said yourself "they need a new accountant".

 

[TheRemainsOfTheDave]

You pay CT on profits. So you make no profits, then how much CT do you pay?

I make it sound like tax avoidance when absolutely that's what it is. Small businesses and self-employed people all over the show, do exactly this sort of thing to avoid paying tax. You even said yourself "they need a new accountant".

You can't pay any dividends if you're not making any profit, so yes in that case you pay no CT. If you're paying yourself a high salary instead then you get caught by self assessment and pay income tax. Most one man bands will pay minimum salary (actually refuces NI to nil) and only pay dividends when there's profit. If there's no money for salary, then you don't get paid at all.

That's the risk.

 

[Chippy_boy]

You can't pay any dividends if you're not making any profit, so yes in that case you pay no CT. If you're paying yourself a high salary instead then you get caught by self assessment and pay income tax. Most one man bands will pay minimum salary (actually refuces NI to nil) and only pay dividends when there's profit. If there's no money for salary, then you don't get paid at all.

That's the risk.

So you pay yourself the absolute minimum you can in salary in order to stay under the appropriately low income tax band. Be that £11,850 or £46,350 or whatever. You claim for your car, your home office, your computer equipment, your christmas party and god knows what else, you pump as much as you can into your pension and pay yourself the rest in dividends, on which the highest rate of tax is 32.5% instead of 45%.

Basically you are MILES better off. I know this, since I am the poor sap on PAYE and my sister is the one creaming it in and paying fuck all tax. Not that I am bitter at all ;-)

 

[TheRemainsOfTheDave]

So you pay yourself the absolute minimum you can in salary in order to stay under the appropriately low income tax band. Be that £11,850 or £46,350 or whatever. You claim for your car, your home office, your computer equipment, your christmas party and god knows what else, you pump as much as you can into your pension and pay yourself the rest in dividends, on which the highest rate of tax is 32.5% instead of 45%.

Basically you are MILES better off. I know this, since I am the poor sap on PAYE and my sister is the one creaming it in and paying fuck all tax. Not that I am bitter at all ;-)

I suggest you try doing it then. Nothing stopping you. Maybe then you'll understand how it works.

 

[Chippy_boy]

I suggest you try doing it then. Nothing stopping you. Maybe then you'll understand how it works.

Maybe I do already.

 

[hilts]

I suggest you try doing it then. Nothing stopping you. Maybe then you'll understand how it works.

That’s like saying fuck the poor why don’t they all become multi millionaires. You either want a fair tax system or as your post comes across you just want one for everybody else.

 

[TheRemainsOfTheDave]

That’s like saying fuck the poor why don’t they all become multi millionaires. You either want a fair tax system or as your post comes across you just want one for everybody else.

Say what?

I'm saying the tax system is fair. Yes, those using a limited company may be better off, but there's more risk. I, for instance, spent about £30k setting up my business when you factor in initial training costs and wages that I could have earned carrying on in the employment I was in. If you're asking for exact same taxation amounts £ for £, then there's no point doing what I did, which would mean me paying less into the system.

Anyway, my point was, anyone else can try it if they want to.