Imagine one was a PAYE employee between April and October and earned £80k, paying PAYE and NIC accordingly.
Then he went contracting from November to March and earned £105k. He thought he was outside but turned out he was inside. After the 5% "company expenses" deduction his "deemed payment" is £100k, which is now due "inside IR35 taxes"
Do we work out his tax bill as £180k (i.e. 20% of 50k + 40% of 100k + 45% of £30k)?
Or are they two separate bills and the £100k still has the £12.5 tax free allowance, then £37.5k at 20% then £50k at 40%?
Common sense would indicate the former but given it's not actually PAYE but "broadly equivalent taxes" I'm not clear
@NLUK
My accountant is unclear too...
Then he went contracting from November to March and earned £105k. He thought he was outside but turned out he was inside. After the 5% "company expenses" deduction his "deemed payment" is £100k, which is now due "inside IR35 taxes"
Do we work out his tax bill as £180k (i.e. 20% of 50k + 40% of 100k + 45% of £30k)?
Or are they two separate bills and the £100k still has the £12.5 tax free allowance, then £37.5k at 20% then £50k at 40%?
Common sense would indicate the former but given it's not actually PAYE but "broadly equivalent taxes" I'm not clear
@NLUK
My accountant is unclear too...
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