Poll: How did the dividend tax reform of 2016 affect your day rate?

[northernladuk]

Bit fixated aren't you?

[Yorkie62]

That's all good stuff guys. Thank you. It's interesting to see how many different reasons there are for adjusting the day rate (or not).

Apart from other factors did you consider the dividend tax increase in your day rate adjustments?

Why? The dividend tax is not a business expense. It is personal taxation and hence nothing to do with the day rate or hourely rate my Co charges.

My rate is set contract to contract taking into account any business expenses required to fulfil that contract. What and how my Co pays me has nothing to do with any contract my Co enters into. If I have bench time my Co still pays me regardless.

[WordIsBond]

I did indeed not think about that case. Thanks for pointing out.

Well, I didn't THINK that you had thought about it and intentionally left it off.

[WordIsBond]

Why? The dividend tax is not a business expense. It is personal taxation and hence nothing to do with the day rate or hourely rate my Co charges.

My rate is set contract to contract taking into account any business expenses required to fulfil that contract. What and how my Co pays me has nothing to do with any contract my Co enters into. If I have bench time my Co still pays me regardless.

That's a bit myopic, I think.

If the cost of living goes up, responsible employers if able will increase their employee's compensation to at least partially, if not fully, mitigate what their employees are facing. That's a business expense.

So yeah, I'd say the dividend tax is effectively a business expense. It reduces the disposable income of YourCo's employee(s)/office holder(s), and so means YourCo needs to increase their compensation if they aren't going to lose out. That's a business expense, as far as the real world is concerned, even if it isn't for tax purposes.

Basic economics. It's also why "tax the rich" never works. The "rich" own businesses and they'll increase prices to compensate themselves for their increased tax bill. So the consumer, the guy on the street who votes for "tax the rich," always pays for "tax the rich" eventually.

If they increased the dividend tax to 50%, you'd say, "Hang that, whether it's a business expense or not, I'm increasing my rates or I'm stopping contracting." They only turned up the water temperature enough for the frogs not to notice and jump out of the water. Another increase and I'll probably pass on the whole thing. I don't have much clout with HMG, but some of my clients do, and they need to be saying, "Hey, this game you are playing, it's costing us money."

[Lost It]

Haven't even considered it yet. Different business though, building professional.

But I am being head hunted quite fiercely now, and I'm being offered some pretty juicy rates. So I'm wondering if:

A) My rates are too low.

B) I really am so good that I'm in demand. (Reputation counts for a lot).

c) Whether to just stick in a 15% rise...

[davidbieder]

If the cost of living goes up, responsible employers if able will increase their employee's compensation to at least partially, if not fully, mitigate what their employees are facing. That's a business expense.

So yeah, I'd say the dividend tax is effectively a business expense. It reduces the disposable income of YourCo's employee(s)/office holder(s), and so means YourCo needs to increase their compensation if they aren't going to lose out. That's a business expense, as far as the real world is concerned, even if it isn't for tax purposes.

Basic economics. It's also why "tax the rich" never works. The "rich" own businesses and they'll increase prices to compensate themselves for their increased tax bill. So the consumer, the guy on the street who votes for "tax the rich," always pays for "tax the rich" eventually.

I agree with WordIsBond. In comparison to larger businesses, for a single contractor with his own limited the line between business expenses and all the different taxes (including income tax) kind of becomes irrelevant. What counts at the end of the day is the take-home on one end and the day rate on the other end. If my take home goes down due to increased expenses or tax reforms I would compensate that with a higher day rate. Why should I accept to take home less?

One could argue that all the past and upcoming tax increases will hit the regular tax payer in the end. If some of us are contracting for Costa for instance, and we are increasing our day rate (which we should for other reasons as well), the latte will become more expensive for John Doe, who is employed and always paid his income taxes to HMRC.

[Lockhouse]

My rate is about the same but I'm deliberately spending far less.