Personal Taxation

Personal Taxation

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Hi all,  is it me that's missing a trick here?  I've just had a client in the office to advise me that a reputable website has posted the following statement "so a contractor can effectively earn up to £32,010 plus their £9440 tax allowance without paying additional tax."  Am I missing something here, is this statement misleading???

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By frustratedwithhmrc
30th Jul 2013 12:24

Not quite. It depends upon the circumstances
It depends upon the circumstances, as long as IR35 does not apply, then a salary of £640 monthly / £7,696 annually; plus dividends of £30,379 would attract no additional taxation beyond the corporation tax due (i.e. 20%)£38,075

The tax free allowance for 2013/2014 is £9,440.00, but if your client receives a salary of £9,440.00 this year he/she still end up paying Employees NI of £203.04 and Employers NI of £240.67.

This is because the levels where Employees NI and Employers NI are chargeable are now below the tax free level for income tax.

In effect, you've saved on the payment of NIC's through this approach as the basic rate for personal income tax and the small profits rate of corporation tax are aligned @ 20% for 2013/2014

Any client package should also include the costs of tax investigation insurance to deal with IR35 risks / contract review, etc.

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By finegana
30th Jul 2013 16:46

Excluding NI for a moment

but if they took 7696 thru payroll, can they take the 32010 as Divi without incurring tax personally?

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Replying to RedFive:
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By frustratedwithhmrc
30th Jul 2013 17:23

Yes

finegana wrote:
but if they took 7696 thru payroll, can they take the 32010 as Divi without incurring tax personally?

Provided that there is no other income from other jobs and the £7,696 is the entirety of salary / savings income and £30,379 is the entirety of dividend income. I'm not going to "ignore" NIC's as there is no basis to do so (i.e. non-resident company / non-resident employee)

http://www.hmrc.gov.uk/taxon/uk.htm

A bigger question is why don't YOU seem to understand it as this is pretty 9-to-5 stuff?

 

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Replying to andy.partridge:
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By finegana
30th Jul 2013 22:24

Just asking...

frustratedwithhmrc wrote:

finegana wrote:
but if they took 7696 thru payroll, can they take the 32010 as Divi without incurring tax personally?

Provided that there is no other income from other jobs and the £7,696 is the entirety of salary / savings income and £30,379 is the entirety of dividend income. I'm not going to "ignore" NIC's as there is no basis to do so (i.e. non-resident company / non-resident employee)

http://www.hmrc.gov.uk/taxon/uk.htm

A bigger question is why don't YOU seem to understand it as this is pretty 9-to-5 stuff?

 

Maybe I shouldn't have asked, I just thought with this being any answers it was a suitable place to do so :-D
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By the_Poacher
31st Jul 2013 07:57

Bring back Investment Inome surcharge

Nice to see you lot doing your bit to deplete the NI fund.  Who's going to pay for your client's state pension? Or the hospitals?  It's about time IIS was re-introduced on non NICable payments from close companies

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Replying to Justin Bryant:
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By awoodj
31st Jul 2013 10:48

Don't shoot the messenger

Accountants are here to advise their clients how best to conduct their tax operations (as well as other things) within the legal framework set out by government. To not set out the most tax efficient way of doing this would be giving bad advice. You may also want to consider that if you don't pay NI you are also entitled to less benefits which offsets the reduced NI, and further to this do you really believe NI is ring fenced for those particular services?

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Replying to Justin Bryant:
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By frustratedwithhmrc
31st Jul 2013 10:58

Hypothecation was ended decades ago...

the_Poacher wrote:
Nice to see you lot doing your bit to deplete the NI fund.  Who's going to pay for your client's state pension? Or the hospitals?  It's about time IIS was re-introduced on non NICable payments from close companies

Hypothecation was ended decades ago, NIC's of both forms are just another form of income tax pretending to be something it is not (i.e. premiums for social insurance).

I am paid by my client to ensure compliance with tax law and give them options. If they choose to operate legally in such a way as to pay less tax then they are free to do so.

If my client chooses to pay more tax rather than less due to the moral arguments you propose, then I will assist them in doing so, although I've never had that particular request yet.

Parliament is empowered to change the law on this at any time.

 

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By Chris Smail
31st Jul 2013 08:14

Yes it is misleading as extracted here

The statement does not mention the Corporation Tax, but that may have been further up the screen.

Did you post to draw this apparently misleading website to our attention or because you really do not understand tax? I presumed the former until your reply on Tuesday at 16:46. 

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Replying to lionofludesch:
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By finegana
31st Jul 2013 21:20

:-0

Chris Smail wrote:

The statement does not mention the Corporation Tax, but that may have been further up the screen.

Did you post to draw this apparently misleading website to our attention or because you really do not understand tax? I presumed the former until your reply on Tuesday at 16:46. 

Ease up on the criticism, it was a genuine question - maybe I'm having a bit of a blonde moment on this topic right now! I was just hoping for a little support and advice...an example calculation would be good as I still can't see it for some reason???  Is anyone prepared to constructively help the penny drop, or are you all out looking for an argument/an opportunity to knock someone for a genuine statement?
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