£100k + earners in for a shafting next year?

[TheAnimus]

Hey shaithis, if your doing that you've got to take in to account the good that plenty of these small companies do.

Mine has given £2k to a charity I have faith in the people who administer, this calendar year alone, note this is written in feb. Also all sales of one product goes to another too.

I wounder what would be the first outgoings I'd cut back on if my real world income where to drop, would i deprive myself of another holiday, or think "well x has been given y over the last year, and z has been given.....".

My point is if anything they would probably suffer more accelerated loss than my personal lifestyle would suffer.

[Saracen]

....

Now this is an honest question. How does income work for the Royal family? I would imagine that they do not have to pay tax but rather receive them but do they receive a fixed/percentage of it every year?

I think we ought to leave that to another thread, or we'll go way off track. But by all means, start one.

...

That said I am a little more enlightened regarding tax break. Well, I am pretty sure the people who are affected will take all those considerations into account before they complain or decide that they are still better off elsewhere. Fair is kinda academic (though interesting), but I am sure the government is just interested in the result (getting elected and improving the services - I hope, and paying back those debt). And that goes for the people affected too (to move or not to move).

Ah.

A couple of interesting points.

Mainly, we've been arguing about whether changes to the tax system are fair on high earners, and the answer to that largely depends on how you assess "fair".

I did comment some time back in passing, or at least I think I did, on why a government would do this (and by "this", I mean the change in PAs above £100k). It'll come as no surprise to regulars that my answer to that would be that, at least in part .... because it's an election year!!!

They do it (IMHO) because :-

1) It's an easy change to implement
2) It's pretty effective, and short of leaving the country, hard to avoid
3) Given that it makes about £2.5k difference to the tax bill, it's not big enough to be motivation to emigrate, or at least, not on it's own.
4) This is the biggest (IMHO) reason .... it's politically expedient.


It allows Labour to say, and I'm just waiting for it to happen and I'd bet it does ..... "we're taxing the wealthy, and the Tories want to give millionaires tax breaks on Inheritance tax". It is, in my view, cynical political positioning, and rank hypocrisy at that, after the abolition of the 10% introductory tax rate.

But at the end of the day, ANY tax change is going to be redistributive, either is where the burden of tax falls or in how the revenue raised is disposed of. Regardless of how it bites, and on whom, I can't help but feel that doing this, and especially doing it right before an election after 13 years in power, is rank political hypocrisy and strategic positioning. I don't disagree with the move, but the timing stinks.

[shaithis]

Hey shaithis, if your doing that you've got to take in to account the good that plenty of these small companies do.

Please. They aren't doing it to spread joy in the world. It's purely out of greed. You can pay less tax by fiddling a ton of things PAYE people do not get the chance to.....and thus you do. Otherwise you would opt to be PAYE as the accountancy bill would be less and there would be less effort needed on your part.

Mine has given £2k to a charity I have faith in the people who administer, this calendar year alone, note this is written in feb. Also all sales of one product goes to another too.

Oh, you martyr!....how much tax did you save paying by making those donations?

I wounder what would be the first outgoings I'd cut back on if my real world income where to drop, would i deprive myself of another holiday, or think "well x has been given y over the last year, and z has been given.....".

No idea what you are getting at there.....doesn't make any sense to me....but as with most people, what you cut back on would be a very personal choice.

My point is if anything they would probably suffer more accelerated loss than my personal lifestyle would suffer.

Who? The charities? Sorry but I like to give to charity as well but as PAYE it comes out of my pocket, not my tax!

[Bugbait]

I wonder how much of an issue this would actually be if there were not so many "tax dodgers"?

Those self-employed people who manage to dodge a fair amount of tax every year with their silly 1-man companies, umbrella organisations and free (or at least subsidised) pension schemes, life insurance etc?

It could be argued that if the higher tax bracket wasn't such a steep jump then there would be fewer "tax dodgers". You have to also factor in the cost to the government of enforcing (using that word lightly) a complex tax model. Would the government be better off with a more streamlined system?

If the law allows a silly 1 man company then why not take advantage of it? Free pension scheme? Not exactly, but certainly one with attractive tax incentives. Then again, I would argue this makes sense as it potentially removes a notable burden on the state pension fund which is in very poor shape. Subsidised life insurance? Barely, since the majority of fringe benefits are now considered benefits in kind and are taxed accordingly so the actual advantages are minimal at best.

[Rob_B]

There's a portion of NI that goes to the state pension, however I'm fairly sure anyone can request that this be redirected to their own, privately managed pension pot. Loop hole? Maybe, but it also has the potential to take a strain off the overburdened state pension system.

I'm intrigued, any more info on this ie +'s or -'s ?

[shaithis]

It could be argued that if the higher tax bracket wasn't such a steep jump then there would be fewer "tax dodgers". You have to also factor in the cost to the government of enforcing (using that word lightly) a complex tax model. Would the government be better off with a more streamlined system?

Who knows...but there is probably only 1 way to find out.

If the law allows a silly 1 man company then why not take advantage of it?

Indeed.......well, as long as the job you do will allow you to be self-employed. Many people do not have the choice.....pretty unfair to them don't you think?

Free pension scheme? Not exactly, but certainly one with attractive tax incentives. Then again, I would argue this makes sense as it potentially removes a notable burden on the state pension fund which is in very poor shape.

Removes a small burden on the pension fund at the cost of less tax.....the net gain is only in YOUR favor, not the rest of the nation.



Oh and the point of all this is that the vast majority (if not all) of the UKs 100k+ earners use these 'tax fiddles'. If you actually paid tax as a PAYE person, then these new measures probably wouldn't have been needed. They tried to curb it all a year or 2 ago but everyone found more loopholes.......so I am not surprised that they have come up with a non-dodge-able way to get you to pay a fair amount.

[Bugbait]

You can pay less tax by fiddling a ton of things PAYE people do not get the chance to.....and thus you do. Otherwise you would opt to be PAYE as the accountancy bill would be less and there would be less effort needed on your part.

I for one will freely admit I use the tax laws to my advantage for purely selfish reasons and won't apologise for it either. ANYONE can do the same. Do I get grief from some of the envious permanent employees at my current client site? Sure. Do I care? No. The only thing stopping them for doing the same is confidence and personal ability, which has nothing to do with me, nor should it. It's not like self employment is only available to "special people".

Oh, you martyr!....how much tax did you save paying by making those donations?

The tax saved is still far less the total amount donated so it's still a good cause in my opinion. A company making a donation (assuming it's more than the minimum £2 or whatever) would be able to offset it against the gross earnings. When you consider a lot of small companies make less than £300k profit (Or is it turnover? I forget) then they're only paying 21% corporate tax anyway. That's not exactly a huge saving or a strong case for giving a donation purely for tax saving purposes.

Who? The charities? Sorry but I like to give to charity as well but as PAYE it comes out of my pocket, not my tax!

Giving to charity from PAYE is not really different to a Limited company. Sure, it initially comes out of your post tax pot of money instead of directly from the company accounts but at the end of the tax year you can still claim back exactly the same amount (donated). Possibly more if you're being taxed higher that what a small company is paying. So actually, even as PAYE it is coming out from your tax, depending on your perspective.

[Bugbait]

Who knows...but there is probably only 1 way to find out.

Yes, introduce a flat tax rate for all .

Indeed.......well, as long as the job you do will allow you to be self-employed. Many people do not have the choice.....pretty unfair to them don't you think?

Taking a page from Saracen's book, it depends how you define "fair". I've never been a supporter of the socialist model since there will always be a disparity in effort of individuals. There is more to being self employed than simply cooking the books.

One example: I do part time and once off jobs for various clients when I can be bothered. A lot of my permanent colleagues don't even have this option because they are tied in by their employment contracts. I enjoy the freedom of the being selective about who I work for and on what projects. Since I only get paid when I work I can also choose when and how often I take holidays as long as it doesn't impact any current projects. It's not always simply a case of money and tax breaks.

There are many positions that allow for contractors so if people want to take advantage of it then it's purely up to them to make the necessary adjustments. Anything else is simply an excuse and sour grapes.

Removes a small burden on the pension fund at the cost of less tax.....the net gain is only in YOUR favor, not the rest of the nation.

I'd need to check the exact figures but you might be surprised when you compare the size of private pension portfolios to the state pension. Without private funds the state pension would absolutely collapse.

Yes, it's ultimately to MY favour but I don't deny that. I ultimately don't work for the good of the nation, I work so my family and I can enjoy a good lifestyle. I would argue that this is the mentality of 99.9999% of the world's population.

Oh and the point of all this is that the vast majority (if not all) of the UKs 100k+ earners use these 'tax fiddles'. If you actually paid tax as a PAYE person, then these new measures probably wouldn't have been needed.

Are you advocating a cooker cutter society where everyone should "suffer" equally? Why shouldn't people have various options in ways to earn a living?

How about tax credits? Are these so fundamentally different to the "tax fiddles" you're referring to? There are many people who don't take advantage of their tax credits either but who's fault is that? The government should shoulder some responsibility for making it so complex but individuals need to step up as well.

[Bugbait]

I'm intrigued, any more info on this ie +'s or -'s ?

I haven't dug too deep into it yet, but to clarify it's the Second State Pension component that you're claiming on: http://www.1stcontactenews.co.uk/fea...-average-1645/ was the link I was sent a while back. I sure you could Google more information from there.

[TheAnimus]

Please. They aren't doing it to spread joy in the world. It's purely out of greed. You can pay less tax by fiddling a ton of things PAYE people do not get the chance to.....and thus you do. Otherwise you would opt to be PAYE as the accountancy bill would be less and there would be less effort needed on your part.
...
Oh, you martyr!....how much tax did you save paying by making those donations?

So I'm fiddling tax you say, exactly how putting of my business income, which would have been taxed quite simply at corp levels to a charity, saves me money? How? I'm loosing money only!

Also, I pay myself via PAYE, I need libaility afforded by LTD status, so I have an account to sign off on my accounts and handle all the tax, because even PAYE is quite time consuming, thats nothing compared to dealing with the VAT.

Who? The charities? Sorry but I like to give to charity as well but as PAYE it comes out of my pocket, not my tax!

Erm, then your doing the charitable people a disservice, look at Give As You Earn!

My point was simple, remember when you remove money from the population, which is what taxation is, that money is not always some evil thing.