Tax - how much of your gross do you pay?

coolsurfer said:
Hi folks, this isn't a bragging thread but wanted to have a discussion about what would be a fair % of tax on your earnings/other income.

As a freelance pharmacist My accountant has set my affairs as a limited company such that I earn £670/month salary on which I pay no income tax or NI. The rest of my income comes from dividends. THe company pays 20% corporation tax and then there's some more dividend tax depending on how much I withdraw as dividends during a particular financial year. I will actually gain state pension stamp despite paying no NI.

I have estimated that because of the way my affairs are set up I actually pay just 12-15% of my gross earnings as tax. If I was salaried for the same income instead I would be paying more like 35%.

Is this fair enough on the basis corporations like Google, Amazon, Starbucks, Facebook get away with low single digit percent tax?
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Standard unless you want to break the law to pay more tax!
 
billysielu said:
Did you pay for your education up to 18?
- Got a scholarship. And parents paid tax for someone elses education.

Did you pay for your own medical bills?
- I have used the NHS, and also have private medical.

Did you thrive in a stable, peaceful, ordered society that is constructed and kept going by all the peoples taxes paid to date?
- This doesn't stop because taxes become fair.

You'll assume I'm privileged in some way. I'm not, I grew up in a single parent minimum wage family. I worked hard and have earnt a higher rate but by no means exceptional salary. I've lived in shocking conditions to scrape together a deposit for a house, when people in the next street are given the same houses they haven't earnt.
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Paying tax of some description is meaningless. The crux of it is are you or your parents net contributors to the tax system? If you aren't, then you are being subsidised by tax payers that are net contributors as you wouldn't have been paying fully for the services you have received or are available to you.

If as you say, yours was a minimum wage family, then your family were living off the backs of other higher tax payers. How does that fit in with your I'm not paying for anyone elses family ideals?

The reality is that you have to be currently earning about £37k a year to pay enough tax to be a net contributor to the tax system and according to the ONS only 20% of the population earn over that amount. That means 80% of the people dont pay their way fully to support the services we have and expect to be able to have access to.

Its also the reason I dont believe a flat tax system would work. If only 20% of the population pay their way fully, then any reduction in tax for those individuals has to affect services or put a greater strain on the 80%
 
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Bear said:
Paying tax of some description is meaningless. The crux of it is are you or your parents net contributors to the tax system? If you aren't, then you are being subsidised by tax payers that are net contributors as you wouldn't have been paying fully for the services you have received or are available to you.
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Yep, my family still aren't net contributors - but I am. I think it helps me to have both perspectives, I still believe what I'm saying is morally right.

Bear said:
It's also the reason I don't believe a flat tax system would work. If only 20% of the population pay their way fully, then any reduction in tax for those individuals has to affect services or put a greater strain on the 80%
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So that's near enough to saying that only higher rate tax payers pay their own way, and of course most of the burden will be on something more like the top 2% and that's why they're so motivated to avoid paying it. The reality is people on £40k aren't wealthy at all - you can't get a house on that here. Like I've said before, I don't want to move the bracket, I want to scrap it in favor of a fair system - it's just as wrong to take someone's £4,000,000th pound as it is their £40,000th.
 
Repeating your mantra that you believe all taxation is wrong doesn't change the reality that things need paying for. If you reduce the amount of funding you receive from one area then you either need to reduce the public services provided or you need to try and make that shortfall up somewhere else.

Your vote would be for reducing public services based on the idea that you don't personally need them, which isn't how a society works.
 
platypus said:
Well, I'm sort of on the fence about it. I don't mind it half as much as it might appear.

What really ticks me off is the self-righteous smug [legal]avoiders like the OP, Flukester, Mad Rapper etc who take great enjoyment in pointing out how much they can avoid, and keep telling people how much of a mug they are for being on PAYE and being annoyed that they can't avoid more tax.
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You sound insane.... ALL businesses claim back all the expenses they are entitled to against their profit, it's how business works.

If you don't understand this then....

1. You have never run a business
2. You run a business that makes losses
3. You're a bit dense

Seriously, don't make sweeping statements you appear to know nothing about

It's taken me many years to find out exactly what I can claim against my profits and what I can't... I now run a fully optimised business where I pay what is due, not a penny more. Because of this I can lead a comfortable life.


PAYEers are in the same boat... you have your figures worked out for you, you pay what is due in the eyes of the law just as the self employed. We are no different, but you seem to think reducing profits against business expenses and running a Ltd company is not moral

If you were self employed would you purchase anything through your business and offset against your profits ?, or pay yourself dividends from your Ltd company?, if the answer is no, then you are not being honest ... or you are the most stupid person I have ever seen on the interweb

Next thing you will be saying is that goods (stock) bought then sold cannot be tax deductible... it's not moral :)


One last thought, you pay tax on your PROFITS, £100k turnover cost £90k to generate via all business outgoings. 10K profit is taxable. If I left out the coffee machine for my office, or my motoring use etc etc, not only would it cost me personally for no reason, my business (me also) would pay more tax for no reason
 
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billysielu said:
- if, like me, you don't want the government to do this for you, then there's no need to fill a pot with money to fund it.
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You've opted out of your state pension then, of course? Or are you still going to collect it when the time comes?

billysielu said:
Yep, my family still aren't net contributors - but I am. I think it helps me to have both perspectives, I still believe what I'm saying is morally right.
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Do you think that your family shouldn't be receiving the services they've received then?

Flukester said:
more stuff
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You've intentionally skipped the point where I've said tax avoidance doesn't bother me so much but it's the smugness and self-righteousness that's irritating. But carry on being so.
 
platypus said:
Do you think that your family shouldn't be receiving the services they've received then?

You've intentionally skipped the point where I've said tax avoidance doesn't bother me so much but it's the smugness and self-righteousness that's irritating. But carry on being so.
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Stop calling it tax avoidance, it's not, it's paying tax on what is due, nothing more.

You are using the term avoidance to insult others.... it's working on me
 
Ace Modder said:
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.
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So essentially it didn't bother you until it started affecting you personally, or you've perceived it to be doing so.

Why do you put so much stock in the laws that say you should pay "x" amount of tax, but not the ones that say you don't have to if you satisfy "y"?

You seem to be very much thinking only about yourself a f how if you have to pay tax then everyone should have to pay the same.

There is no "fair" or "morality" when it comes to tax. You pay tax in everything you do. If you earn more you'll typically spend more and therefore contribute more to the economy via supporting business as well as the VAT on the goods you buy.

You're coming across as a bit of a baby really.
 
Flukester said:
Stop calling it tax avoidance, it's not, it's paying tax on what is due, nothing more.

You are using the term avoidance to insult others.... it's working on me
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But using the mechanism of becoming a director in a Ltd company, taking minimal PAYE payments to trigger NI contributions (without actually paying any NI) and taking the rest of your earnings in dividends *IS* tax avoidance, perfectly legal, but tax avoidance nontheless

And I say this as an accountant who sets this up for clients.
 
But avoidance is legal, so why would the word insult you, unless you feel a bit uncomfortable about it?
 
billysielu said:
So that's near enough to saying that only higher rate tax payers pay their own way, and of course most of the burden will be on something more like the top 2% and that's why they're so motivated to avoid paying it.
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Let's be fair with high earners - only some are motivated to avoid paying it. There's plenty of people out there who are happy to pay their taxes and see it as either paying back a society for past support or as the price for living in a civilised society.

Freakbro said:
But using the mechanism of becoming a director in a Ltd company, taking minimal PAYE payments to trigger NI contributions (without actually paying any NI) and taking the rest of your earnings in dividends *IS* tax avoidance, perfectly legal, but tax avoidance nontheless

And I say this as an accountant who sets this up for clients.
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Isn't paying less than the fair market rate actually tax evasion in most cases under IR35?
 
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