Whats your views on Budget 2015?

[WordIsBond]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

When does this kick in? For this tax year or next?

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

Sounds like it. So he's hit contractors who were using it by £2K with the employment allowance, and by another £2K on dividend tax. Not sure when those provisions take effect. In return, we get a £400 increase in the basic rate tax threshold, £715 in the higher rate threshold, next year. And in 2017 we get a 1% cut in corporation tax and another 1% in 2020.

Someone is going to have to revise their estimates on what IR35 saves the government. Another budget like this and they might as well scrap it because we won't be that much better off on tax than permies.

Did he actually say anything at all that would make IR35 better?

[Dan@OrangeGenie]

Don't forget its just a proposal at this point, lets wait to see the fallout and finer detail.

[Wijay@WISAccountancy]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

I am not clear on this either - need to look at the full proposal...

[Wijay@WISAccountancy]

Did I just hear PSCs with a sole director as the only employee no longer qualify for the NIC employment allowance?

Correct - but if you are contractor and paying corp tax - the offset will come in on Corp Tax...

[Maslins]

"Mr Osborne says the dividend tax system is "complex and archaic". He's replacing dividend tax credit with a tax-free allowance of £5,000 of dividend income for all taxpayers.

The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%."

If that's right, that'll be a reasonable blow for PSCs and indeed most small Ltd Co owners. Currently you can take ~£8k salary and ~£30k dividend without suffering personal tax. Going forward unless I've misunderstood, it'll be ~£8k salary and £5k dividends, if you still want to take £30k you'll suffer 7.5% personal tax on £25k of it = £1,875.

Might even up the whole Ltd Co vs sole trader debate, where from a tax perspective Ltd Cos have tended to win hands down in recent years. Appreciate many businesses taking on employers won't touch sole traders though.

[SimonMac]

If that's the rule with no extra fluff then I can see plenty of PSCs wanting to perhaps employ someone else on a zero hour contract, with no hours expected. Hey presto, two employees so you can claim.

I really wish they hadn't introduced the employment allowance in the first place. So much more faff than it's worth...and now they need to introduce further complexities because people were in their eyes abusing the initial system.

Drives me nuts, no wonder the tax system gets so complicated, as they're constantly introducing new crap, which they then get upset that some people use, so they need new "anti avoidance" rules to stop it being used...inevitably people find ways around that so yet more legislation is required. Massive waste of everyone's time, all chasing pennies.

#rantover

They bring this rule in after making it difficult for PSC's to have muplitple employee's due to the Pension Auto Enrollment, its almost like the left hand is in fact talking to the right!

[7specialgems]

Starting to wonder if the NIC allowance was always intended as a trap that can be used in a data query to flag up PSCs and help compliance teams isolate targets for enquiries.

As has already been suggested, non PSCs go forward unaffected.

[Maslins]

Did I just hear PSCs with a sole director as the only employee no longer qualify for the NIC employment allowance?

If that's the rule with no extra fluff then I can see plenty of PSCs wanting to perhaps employ someone else on a zero hour contract, with no hours expected. Hey presto, two employees so you can claim.

I really wish they hadn't introduced the employment allowance in the first place. So much more faff than it's worth...and now they need to introduce further complexities because people were in their eyes abusing the initial system.

Drives me nuts, no wonder the tax system gets so complicated, as they're constantly introducing new crap, which they then get upset that some people use, so they need new "anti avoidance" rules to stop it being used...inevitably people find ways around that so yet more legislation is required. Massive waste of everyone's time, all chasing pennies.

#rantover

[7specialgems]

We are firmly in the cross hair in this budget. I shall be reading the fallout from this in the next few days attentively and under no circumstances whatsoever will I ever again be working with the public sector.

[TheFaQQer]

Did I just hear PSCs with a sole director as the only employee no longer qualify for the NIC employment allowance?

KUATB