2006/7 Corp tax ?

[2uk]

According to HMRC for 06/07 there is no:

Starting Rate 10% : 0 - 10 000
Marginal Relief: 10 000 - 50 000

And the 19 % rate applies from 0 GBP. WHY they did this cruel deed??

[Ardesco]

Because el Gordo has decreed that far too many people are making up to £10,000 profit and they should be punished for not making more and giving him a nice wad of cash.

Just another attempt by this government to line thier pockets with more cash while telling everybody then are not personally taxing you more.

[2uk]

Because el Gordo has decreed that far too many people are making up to £10,000 profit and they should be punished for not making more and giving him a nice wad of cash.

Just another attempt by this government to line thier pockets with more cash while telling everybody then are not personally taxing you more.

So does this change somehow the strategy - 20K in salary and the rest in dividends ?

[XLMonkey]

So does this change somehow the strategy - 20K in salary and the rest in dividends ?

Nope, even at 19% corporation tax, you are better off with dividends than salary. Even salary in the 10% tax band creates a liability for employee (10%) and employer (12.something %) National Insurance.

[2uk]

Thanks !

[bobhope]

If you look at the history behind this, it's really quite funny. It's either an extremely evil plan or an extremely incompetent plan on the part of Gordo.

He introduces this 0% band in order to encourage lots of self employed people (window cleaners, etc) to incorporate one year.

So lots of people did exactly that. Then HMRC noticed that lots of people have incorporated and are not paying tax on the first 10k.

So the next year, they change the rules back, leaving x thousand people well out of pocket.

You couldn't make it up!

[2uk]

If you look at the history behind this, it's really quite funny. It's either an extremely evil plan or an extremely incompetent plan on the part of Gordo.

He introduces this 0% band in order to encourage lots of self employed people (window cleaners, etc) to incorporate one year.

So lots of people did exactly that. Then HMRC noticed that lots of people have incorporated and are not paying tax on the first 10k.

So the next year, they change the rules back, leaving x thousand people well out of pocket.

You couldn't make it up!

Sounds nasty.

[xoggoth]

Yeh. Evil or incompetent? always a difficult choice for this government, me, I'd go for both.

[tim123]

He introduces this 0% band in order to encourage lots of self employed people (window cleaners, etc) to incorporate one year.

No, he didn't introduce it for this reason at all. He introduced it for some vote winning "Gordo lowers CT to 0%" headlines.

The 0% CT rate was a scam, For 'normal' companies, turning-over the sort of money that is (usually considered) necessary to compenate for the 'aggro' of running a Ltd, the 0% saving was all clawed back with higher rates further up.

But he completely missed the fact that with his new rule, the lower paid SE people could incorporate and earn about 20K almost tax free. Unsuprisingly, accountants did not miss this and informed all they lower paid SE clients to incorporate. In fact they noticed it and openly discussed it before the actual change was implemented and the IR said "no this won't happen", but of course, it did.

And then, with decidely bad grace, Gordo reversed the rule because of the 'abuse' that was wholly forseeable.

tim