Tax - how much of your gross do you pay?

[Steeps]

Are you doing less than 22 hours a week or is your company not paying you the national living wage as required by law? That's a lot of unpaid overtime you seem to be doing if it is full time, I'd be having words with your boss.

Edit: just seen directors do not have to pay themselves the NLW.

 

[cheesyboy]

Legality and morality don't always go hand in hand.

Well indeed. And OP seems capable of recognising the morality, given his highlighting of the big corps in his post.

That said, I would do the same were I in the sort of role where it were feasible. Probably wouldn't start a thread about it though.

 

[scrivz69]

You must vote Tory.

 

[Ace Modder]

That said, I would do the same were I in the sort of role where it were feasible. Probably wouldn't start a thread about it though.

I find the post to be a massive "look at me, I can screw the system and I'm bragging about it" and its rubbing it in the noses of us proper tax payers.

 

[toshj]

I've been thinking about the structure and contribution of such setups recently, as I have a feeling I'm not really understanding it all based on the calculations below.

As an example, let's say that coolsurfer's limited company generates £100,000 in revenue - this isn;t based upon pharmacy, just a number plucked out of the air. Minus his £8,000 salary and any other additional costs of £7,000 pa (estimated), then he'd be declaring a profit of £85,000, which in turn would result in £17,000 corporation tax.

Should he take £60,000 of the remaining cash as dividends then he'd be liable to pay c.£10,000 in tax. That would mean his contribution to the country's coffers would amount at around £27,000 - wouldn't it? I don't know whether he'd need to be VAT registered, or if any VAT would be due based upon his services.

As I generally understand it, a freelancer in this capacity has the option to earn more on a daily basis than a full time employee. So if coolsurfer can charge £100,000 per year for his services, then would it be sensible to estimate that if he was full time his salary might be around £80,000? If this was the case, then at £80,000 he'd be contributing a personal tax amount of £26,000.

Obviously I realise there's various other aspects of his personal work life that he'd be able to get certain tax breaks on, but in general am I wrong in assuming that his overall annual contribution wouldn't differ wildly than if he was a full time contracted employee working at a lower wage and paying tax through PAYE?

 

[peterwalkley]

As a locum pharmacist one day I might work for Boots, another day Lloyds, Tesco, various Independents within a 60mile radius. IR35 need not apply as I'm in different stores all the time.

Am I scamming the system or have I just set my affairs up such that I minimise what I have to pay?

Also if I make pension contributions via the company I don't have to pay the 20% corporation tax on that so theoretically if I could live on £670 I could siphon all the profits into a company pension paying no tax until retirement.

I would say you are certainly gaming the system if you are not paying NI contributions - especially when comparing what a wage slave would be paying for the same gross income. Also ironic given that your income will be off the back of the NHS.

Pre IR35 I was an IT contractor. So as to be not taking the mick, I set my net salary to be about 3 times my monthly mortgage payment and took the rest as dividends - hence I was paying employer's and employee's NI.

It would be fair that you pay less tax than the equivalent wage slave to compensate for the many disadvantages you have, such as no holiday pay, no company pension, life insurance, likely zero notice period and so on. But you seem to be at the extreme end. I would suggest you keep a chunk easily available should the tax man ever come after you.

 

[coolsurfer]

I find the post to be a massive "look at me, I can screw the system and I'm bragging about it" and its rubbing it in the noses of us proper tax payers.

Ace Modder as stated in 1st post I'm not here to brag. I'm sure there are many IT consultants on here earning 6 figures. I earn <£50k and I'm just wanting to discuss whether my affairs are as immoral as big corporations like Apple, Facebook and the like. Is it fair that the current system allows me to arrange my affairs as such and is it fair that billion dollar companies can do the same if not worse?

One could also say that if some of the people who think it is immoral but have pensions that have holdings in these companies then they would be equally guilty knowingly or unknowingly of profiting like me, from tax minimisation strategies?

 

[coolsurfer]

"Every man is entitled if he can to arrange his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure that result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax” (IRC v Duke of Westminster [ 1936 ] AC1 (HL))."

 

[Spook187]

OP on the tax fiddle.

 

[Ace Modder]

Ace Modder as stated in 1st post I'm not here to brag. I'm sure there are many IT consultants on here earning 6 figures. I earn <£50k and I'm just wanting to discuss whether my affairs are as immoral as big corporations like Apple, Facebook and the like. Is it fair that the current system allows me to arrange my affairs as such and is it fair that billion dollar companies can do the same if not worse?

One could also say that if some of the people who think it is immoral but have pensions that have holdings in these companies then they would be equally guilty knowingly or unknowingly of profiting like me, from tax minimisation strategies?

Well I personally hate that Amazon and Apple etc all play the system too. the UK has a massive debt deficit, these companies makes millions (if not billions) in profit and they find ways to pay a lessened tax amount. OK - this is not illegal and I honestly believe that the government should shut it down ASAP, but they don't. Maybe the tory's are to blame with this, old boy hand shakes and all that etc.

But the point is I don't agree with it, especially when the government overall struggles to balance the books. Seeing NHS cuts that have directly affected my wifes ability to have a life-needing operation and the actual operation being delayed numerous times due to "cut-backs" due to lack of funding just makes my blood boil.

In my eyes your avoidance, via legal methods are just as bad as the companies. Of course on your own you don't effect it on the same scale, but 10,000 people who do what you are doing and it all adds up to another big firm avoiding tax.

Tax avoidance is no different to state theft. All of your income, whether it is a dividend or a salary payment should be liable to the same taxable rates for sure. At the end of the day, it is all personal money for you to live on/enjoy.

 

[Danthus]

Hate the game, not the player.

 

[Maccy]

Ace Modder as stated in 1st post I'm not here to brag. I'm sure there are many IT consultants on here earning 6 figures. I earn <£50k and I'm just wanting to discuss whether my affairs are as immoral as big corporations like Apple, Facebook and the like. Is it fair that the current system allows me to arrange my affairs as such and is it fair that billion dollar companies can do the same if not worse?

One could also say that if some of the people who think it is immoral but have pensions that have holdings in these companies then they would be equally guilty knowingly or unknowingly of profiting like me, from tax minimisation strategies?

Depends if they're contracting or working for a consultancy directly.
I fall into the later category and don't earn anywhere near 6 figures.

 

[George Hincapie]

You are not, but you are paying yourself below the legal salary to get around some rules that are outdated and need fixing. People who abuse the system are bad. The system needs closing up though.

I suggest you focus your angst on the multinationals who do precisely that and worse.

 

[peterwalkley]

you can't compare a one man band to Apple, Facebook and so on. Here's a list of things you don't do as a freelance pharmacist:

- Employ staff (paying their employment taxes)
- Produce a physical product that can be sold (and hence earn VAT revenue)
- Rent / operate premises, hence paying business rates

Your argument seems to be "its ok for me to dodge taxes because these other guys do it too".

 

[Ayahuasca]

Quite brave of you OP to be so open about it.

It's the system that needs changing but fat chance of that.

 

[Ace Modder]

Hate the game, not the player.

Admittedly the rules are there and he is only using them to his own advantage, but it is his blatant audacity to post here about it. Did he expect anything less?

My back is up!

 

[Danthus]

You are not, but you are paying yourself below the legal salary to get around some rules that are outdated and need fixing. People who abuse the system are bad. The system needs closing up though.

How do you feel about your employers minimising their tax liability?

 

[Ace Modder]

How do you feel about your employers minimising their tax liability?

Well I don't know what they are or are not doing on this!
However what I do know is that my employer doesn't comment on a public forum about it.

So it is a moot point. And if they are not paying enough tax into the system, then it's not something that I agree with, but as they keep all information confidential, I cannot give any direct comments.

Finally my employer is not UK based, and have no UK registered company, I have zero knowledge of the tax rules and loopholes that may be possible in the Netherlands. That doesn't affect the UK government funding either way, and thus doesn't affect UK services, like the NHS that has affected my wifes health in a direct negative way.

One year ago, my opinion would not have been this strong, but with cuts affecting so much now and directly affecting my family it's a strong point for me.

 

[D.P.]

I find the post to be a massive "look at me, I can screw the system and I'm bragging about it" and its rubbing it in the noses of us proper tax payers.

What a douchebag.

That is the biggest issue. what he is doing is legal, and any sensible person would do the same. But showing off and being a giant douchebag about it is incredibly low!

 

[Pudney]

- Produce a physical product that can be sold (and hence earn VAT revenue)
.

A freelance pharmacist would need to charge VAT if they earn above the registration threshold. VAT applies to the supply of services as well as goods.