There have been times, with a bit of cynicism, I'd have voted for a party fairly confident they'd try their best with the central themes of their manifesto but this time around....
Poll: Poll: Prime Minister Theresa May calls General Election on June 8th
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There have been times, with a bit of cynicism, I'd have voted for a party fairly confident they'd try their best with the central themes of their manifesto but this time around....
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Being self employed doesnt magically give you tons of loop holes. There are ways for PAYE employees to reduce their tax burden too.
Perhaps things have moved on in the last couple of years but the following was true in 2015, and didnt include added bonuses like the extra employment expenses you can legally claim which you cant as a PAYE employee. Was easy to legally reduce that taxable income down even further to leave the self employed person around 20% effective tax.
Salary Limited Company one shareholder Limited company two shareholders
Gross income £80,000 £80,000 £80,000
Salary £71,282 £8,060 £16,120
Gross profit before tax N/A £71,940 £63,880
Employers N.I. £8,717.53 N/A N/A
Employees N.I. £4,758.85 N/A N/A
PAYE £17,712.59 £0 £0
Corporation tax N/A £14,388 £12,776
Net profit N/A 57,552 £51,104
Tax on dividends (income tax) N/A £9,373 £2,640
Income after taxes £48,811 £56,239 £64,584
Effective Total Tax Rate 39.0% 29.7% 18.9%
really? what are they
True, true. I feel as though, regardless of how up to date and aware I am of each parties policies closer to the day, it's still going to be an 'in the booth' decision from me.
Doesn't help that our system is broken beyond belief. My constituency has essentially been a Tory stronghold for the past few decades, making my vote entirely pointless :/
Setting up as a limited company is a totally different scenario to being self employed. I was referring to self employed individuals. There are tax benefits to incorporating, yes, because taxation of dividends is stupid, so I'll grant you that. Whether it makes sense to incorporate depends on a whole lot of issues, though. Also, whether it's easy to reduce that taxable income further depends on your business expenses, but given that employers typically incur those expenses on behalf of employess, I really don't see what your issue is there.
Swervy answer. Obviously it will be the same tax if their taxable income is exactly the same, but its not and you know it. See my example above how a person on £80k compared to £80k paid through their own business can end up £7,400 better off despite both earning £80k headline. And thats before legitimate expenses which then brings this down even lower.
And the allowable expenses for none limited self employed people is far more generous than what an employee can claim to answer your other point.
I'm in a former Lib Dem stronghold but now pretty much a sure fire Tory win - despite the Tory candidate not being very popular the Lib Dems in the area have descended into a shambles and totally collapsed and Labour is practically nowhere to be seen.
EDIT: Your voting decision is about as good as anything this election lol.
Swervy answer? Correct answer. The most accurate answer in tax is "it depends". You should see the studying I had to do for my CTA, this stuff is ridiculous.
Your example refers to incorporating, which is not the same as being self employed.
Legitimate business expenses are a red herring as the employer incurs those costs, not the employee. Your income as an employee already takes them into account.
I can well imagine as its like trying to pin down a school of octopuses!
problem is you're now bringing dividends into the picture whereas this labour policy isn't related to dividend income - essentially this has gone back to what you were conflating the discussion with before
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A legitimate deduction, particularly as it promotes responsible saving. Your deferring tax, you're not avoiding it. You'll be taxed on that income when your draw your pension.
True but the amount of tax you pay when drawing a pension is likely to be lower than that of high earners.
You essentially get to double your personal allowance, as you get one now and one then. In any case, it's better that that you're not saving and needing to be supported at cost to the state.
Please continue.
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Pension?
Plus you can utilise the Basic Rate band in later years (only useful if you pay tax at the higher rate or above).
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