Whats your views on Budget 2015?

[Dan@OrangeGenie]

You could always ask for a higher day rate to cover the short fall?! Hang on....

With a solid, long term tax plan the new tax rates can be mitigated. Get on the phone to your accountant now and request a meeting.

[SimonMac]

You could always ask for a higher day rate to cover the short fall?! Hang on....

With a solid, long term tax plan the new tax rates can be mitigated. Get on the phone to your accountant now and request a meeting.

That is how I am seeing things, its gonna allow/force me to keep more in the company coffers, which means I can drip feed the money out over a longer period

[SpontaneousOrder]

You could always ask for a higher day rate to cover the short fall?! Hang on....

With a solid, long term tax plan the new tax rates can be mitigated. Get on the phone to your accountant now and request a meeting.

Presumably 'long term' means less than 5 years. Heck, perhaps even less that 1 year.

[Zero Liability]

My view is it is not worth the paper it is written on.

[Dan@OrangeGenie]

That is how I am seeing things, its gonna allow/force me to keep more in the company coffers, which means I can drip feed the money out over a longer period

I think that has to be a considered route. Contracting 1-5 years.

With pension, insurances, ER relief, these will become primary tax planning techniques.

I would recommend planning for the long term with a clear exit strategy in mind.

[jpdw]

The divi tax - someone already commented that this will isn't just about contractors but will probably affect pretty much all small businesses (or, rather, their shareholders). So who knows what will eventually get implemented....... Personally I'm fortunate that I can usually keep below the 40% threshold, so the 7.5% is mildly annoying (~2k/yr?) but unlikely to make me stop contracting. Probably encourage me to put more in my pension.....

I'm not surprised that so-called PSC's using the Employment Allowance got picked off. It seemed more applicable due to 'unintended consequences' than the actual original intention of the policy.

[LandRover]

The divi tax - someone already commented that this will isn't just about contractors but will probably affect pretty much all small businesses (or, rather, their shareholders). So who knows what will eventually get implemented....... Personally I'm fortunate that I can usually keep below the 40% threshold, so the 7.5% is mildly annoying (~2k/yr?) but unlikely to make me stop contracting. Probably encourage me to put more in my pension.....

I'm not surprised that so-called PSC's using the Employment Allowance got picked off. It seemed more applicable due to 'unintended consequences' than the actual original intention of the policy.

More into your pension that you will pay tax on anyway!

The budget is horrendous and utterly incompetent concerning small businesses and Ltd Companies. There...feel better...said my piece.

[PerfectStorm]

So, with everything out in the open, anyone got an idea of the likely most tax efficient setup for the next few years?

How do these things usually work, does one accountant stick their neck out and work it all out and the rest copy them or what?

[AtW]

So, with everything out in the open, anyone got an idea of the likely most tax efficient setup for the next few years?

Be poor.

Very tax efficient.

[PerfectStorm]

Nice writeup:

Contractors are to pay an extra 7.5% tax on dividends from April 2016

How to calculate dividend tax after the Summer Budget 2015

Using a fairly typical example of a contractor limited company with profits of £100,000, after corporation tax the distributable profits will be £80,000.

For a contractor income splitting with a spouse or choosing to take a dividend up to the higher rate band, the dividend tax calculation would look like this:

The basic rate is taxed on incomes between £11,000 to £43,000, so there is potentially up to £32,000 of taxable income in the basic rate band
The new rules include an allowance of £5,000, so the taxable dividend is £27,000
The new dividend tax rate for basic rate taxpayers is 7.5%
7.5% of £27,000 is £2025, which is the new additional tax a contractor must pay from April 2016.

For the higher rate tax band, the old rate was 25% of net dividends and the new rate is 32.5%, so has increased by 7.5%. Contractors used to pay 25% of the net dividend, the same as 32.5% of the grossed-up dividend. Under the old rule, higher rate taxpaying contractors effectively paid 40% of pre-corporation tax profits in tax.

The new dividend tax for higher rate taxpayers still requires 20% corporation tax, which on the example above is £20,000, plus an extra 7.5% on the net profit which is £6,000, equalling a 6% increase in overall taxation. Contractors in the higher rate band will pay 46% tax on pre-corporation tax profit, and employees on these earnings are only paying an additional 2%, by way of NI.

We now have a tax system where by small business owners will be paying higher marginal rates of tax than employees.