Will contract rates increase to pass dividend tax increase to clients?

[flamel]

At a time when contracts are harder to come by, do you want to price yourself out of the market? Feel free if your business model is diva and you have the warchest to back up that plan but I'll be simply taking the extension that's currently going through and be grateful if I dodge a rate cut.

I just take it as part of my (seemingly) annual rate cut....

[northernladuk]

Depends if contractors are leaving the contracting business, or contractors are turning down lower paying roles.

Plus don't forget T&S changes that may make contractors turn down roles further afield which reduces supply and drives prices up.

All speculation though. Will have to wait and see.

I doubt that. It might be better. I know guys from the Midlands doing what I do in Manchester yet I'm in the Midlands stealing a piece of their pie. I simple location re-balance will take place initially which I think will probably negate the need for driving prices up. It's not like it's going to leave some areas with zero local contractors. There are so many of us now I can't believe that will happen.

[pr1]

What is a "huge amount" in the context of applying full PAYE and NI through a Ltd or being a sole trader? It wouldn't have to go much further to eliminate the difference entirely. There's a limit to how far they can push the dividend tax. It's a very poor mechanism through which to eliminate tax-motivated incorporation (given the wider use of dividends). On the contrary, this was mainly intended as a source of revenue, with the distributional impacts on particular taxpayers (us) as a secondary benefit. It may go somewhat further, but it cannot go substantially further.

Well 15% would match the employee NI "avoidance" - I can definitely seeing it creeping up to that over the next 5-10 years

My point being that if we accept 7.5% as ok, will there be an argument against it going up to 10% next year, 12.5% the year after, etc?

[jamesbrown]

Well 15% would match the employee NI "avoidance" - I can definitely seeing it creeping up to that over the next 5-10 years

My point being that if we accept 7.5% as ok, will there be an argument against it going up to 10% next year, 12.5% the year after, etc?

As I say, the dividend tax is a blunt tool, the perceived tax gap has now been narrowed, and we're not the only pips that will squeak as we approach 2020 (it impacts a reasonable fraction of the retired Tory base). I think this was motivated by revenue, not principle. However, it's difficult to maintain an argument that low rates of taxation increase overall tax income (as in Gidiot's 8bn assertion about reducing additional rate tax) while also increasing tax rates. That said, I think this will be cleared-up pretty soon, depending on what they do w/ IR35, because IR35 becomes moot if dividends are fully aligned with employment income.

[LondonManc]

As I say, the dividend tax is a blunt tool, the perceived tax gap has now been narrowed, and we're not the only pips that will squeak as we approach 2020 (it impacts a reasonable fraction of the retired Tory base). I think this was motivated by revenue, not principle. However, it's difficult to maintain an argument that low rates of taxation increase overall tax income (as in Gidiot's 8bn assertion about reducing additional rate tax) while also increasing tax rates. That said, I think this will be cleared-up pretty soon, depending on what they do w/ IR35, because IR35 becomes moot if dividends are fully aligned with employment income.

If it's motivated by revenue, not principle, why "apologise" to us through corporation tax cuts?

[NotAllThere]

When IR35 came in, there were many saying "that's it, most contractors will go back to permiedom". Didn't happen and won't happen this time.

[northernladuk]

When IR35 came in, there were many saying "that's it, most contractors will go back to permiedom". Didn't happen and won't happen this time.

We can but hope.....

[pr1]

As I say, the dividend tax is a blunt tool, the perceived tax gap has now been narrowed, and we're not the only pips that will squeak as we approach 2020 (it impacts a reasonable fraction of the retired Tory base). I think this was motivated by revenue, not principle. However, it's difficult to maintain an argument that low rates of taxation increase overall tax income (as in Gidiot's 8bn assertion about reducing additional rate tax) while also increasing tax rates. That said, I think this will be cleared-up pretty soon, depending on what they do w/ IR35, because IR35 becomes moot if dividends are fully aligned with employment income.

But we're not squeaking?

Tory's have introduced it but that doesn't stop anyone else cranking it up as soon as they get the chance

Agreed IR35 becomes moot if they push it up enough, maybe that's HMG/HMRC's long term solution to IR35, saves all the investigations and court time and money, and the risk (& associated implied cost) of losing big cases like arctic systems*

*yes it wasn't an IR35 case but it's a big case that was lost that has massive cost implications to HMRC

[jamesbrown]

If it's motivated by revenue, not principle, why "apologise" to us through corporation tax cuts?

Most small businesses don't pay CT. We do, of course, but this policy announcement has nothing to do with us. It is squarely aimed at increasing FDI and UK incorporation by foreign multinationals, part of the international race to the bottom. Again, the logic is that lower rates build a larger pie.

[pr1]

Most small businesses don't pay CT. We do, of course, but this policy announcement has nothing to do with us. It is squarely aimed at increasing FDI and UK incorporation by foreign multinationals, part of the international race to the bottom. Again, the logic is that lower rates build a larger pie.

But if they're not paying CT then they're not paying any dividends (and therefore are not relevant in a dividend tax argument)?