Official Summer 2015 Budget Thread

[Unix]

1) That's Scala, not Java.
2) Functional programming is is totally different, and a new fashion which means that the few that are competent can command a higher rate.

3)
Risk systems experience
Fixed Income knowledge desirable
Trading systems experience desirable

And getting that experience is very difficult. Hence why IBs pay so much.

That experience isn't so mandatory for permies, and those same IBs are currently paying 450/500 per day, typically, for roles which don't require that risk / equities /etc experience.

No one will pay 90k for run of the mill Java dev.

[DaveB]

Seems it will make sense to pay a spouse's salary (and your own) up to the income tax threshold. The only cost is the Employee NI, and it saves on corporation tax.

But inly if you can justify the salary, since HMRC will class it as evaision if it is not an accurate relfection of the work done.

[TheCyclingProgrammer]

Still getting my head around the new dividend stuff.

For simplicity sake and rounding the figures, if the higher rate threshold is £42k and you take £10k salary, that previously left you with £32k of your higher rate band but it didn't mean you got £32k tax free as that includes the notional tax credit - you'd actually get £28.8k so a total take-home of £38.8k and zero tax.

If I'm understanding the new system correctly, it would now be £10k salary and £32k in dividends. £5k tax free on the dividends and the remaining £27k taxed at 7.5%, leaving you £24975 - total take-home after tax of £39975k and a £2025 tax bill.

So an increase in tax and its up to you where you want to feel the hit - you could reduce the amount you withdraw from the company to bring the tax bill down and feel the hit in your month to month personal finances, or you can continue taking the full amount as above and actually increase your annual take home but the extra tax bill will ultimately hit your company's bottom line as you need to spend more of your company profits. For those of us with decent war chests and decent day rates - I'm sure we'll cope. This is of course before considering other changes like corporation tax which will reduce the overall cost of the higher dividend tax a little.

Also things to think about how it affects those who have a spouse/partner/whoever as a company shareholder. Will the £5k dividend allowance apply irrespective of you other income? If your only income is dividend income, will you still get taxed at 7.5% on dividends between £5-10k even if within the personal allowance threshold, or can you actually earn £15k (personal allowance + dividend allowance) before paying any tax?

[TheCyclingProgrammer]

But inly if you can justify the salary, since HMRC will class it as evaision if it is not an accurate relfection of the work done.

Its not difficult to justify a salary - just don't take the piss with how much you pay your spouse. If all they do is a bit of admin/bookkeeping then nothing says you have to pay them the full personal allowance - even £1k a year would surely mean you are employing somebody can claim the allowance and I think HMRC would have a hard time arguing that less than £100/month for admin work is "excessive".

[tractor]

Still getting my head around the new dividend stuff.

For simplicity sake and rounding the figures, if the higher rate threshold is £42k and you take £10k salary, that previously left you with £32k of your higher rate band but it didn't mean you got £32k tax free as that includes the notional tax credit - you'd actually get £28.8k so a total take-home of £38.8k and zero tax.

If I'm understanding the new system correctly, it would now be £10k salary and £32k in dividends. £5k tax free on the dividends and the remaining £27k taxed at 7.5%, leaving you £24975 - total take-home after tax of £39975k and a £2025 tax bill.

So an increase in tax and its up to you where you want to feel the hit - you could reduce the amount you withdraw from the company to bring the tax bill down and feel the hit in your month to month personal finances, or you can continue taking the full amount as above and actually increase your annual take home but the extra tax bill will ultimately hit your company's bottom line as you need to spend more of your company profits. For those of us with decent war chests and decent day rates - I'm sure we'll cope. This is of course before considering other changes like corporation tax which will reduce the overall cost of the higher dividend tax a little.

Also things to think about how it affects those who have a spouse/partner/whoever as a company shareholder. Will the £5k dividend allowance apply irrespective of you other income? If your only income is dividend income, will you still get taxed at 7.5% on dividends between £5-10k even if within the personal allowance threshold, or can you actually earn £15k (personal allowance + dividend allowance) before paying any tax?

As with IR35, the devil will be in the detail.

Expect the worst, then you won't be disappointed.

[DaveB]

Also things to think about how it affects those who have a spouse/partner/whoever as a company shareholder. Will the £5k dividend allowance apply irrespective of you other income? If your only income is dividend income, will you still get taxed at 7.5% on dividends between £5-10k even if within the personal allowance threshold, or can you actually earn £15k (personal allowance + dividend allowance) before paying any tax?

The way I read it is that spouses with no other income will get £5k tax free, then 7.5% up to the threshold. The personal tax allowance does not cover Dividends, this is a tax specifically on dividend income.

If they have a salary elsewhere then that is taxed seperately and you are still better off declaring the divi income as taking you over the threshold as it's still a lower effective tax rate than full PAYE in the 40% bracket.

[WordIsBond]

But inly if you can justify the salary, since HMRC will class it as evaision if it is not an accurate relfection of the work done.

If you make the spouse a director, it is easier to justify a higher salary.

[MicrosoftBob]

But that will only apply to contractors under "Supervision, Direction & Control" of the client.
This is the same test as for employees under the Agency Worker Regulations.
I don't think any client would want you to fail that test

They wouldn't care after you have moved on and Hector asks, IR35 has no bearing on your employment status and hence any implied employment rights

[TheCyclingProgrammer]

As with IR35, the devil will be in the detail.

Expect the worst, then you won't be disappointed.

Oh I am. Fortunately my wife is only a 25% shareholder so it shouldn't have a huge impact as her annual dividend earnings are £10k plus change. So she'd be looking at £375 a year in tax. She also receives a small salary - perhaps next year it will be time for a small pay rise.

[Platypus]

Marginal tax rate. Explained here.

Thanks, but I think this is what I was referring to:

Paying dividends to higher rate taxpayers


Dividends which fall into the higher rate tax band (for the tax year 2014/15 this is taxable income between £31,865 and £150,000 after taking account of the personal and any other applicable allowances) are taxed at 32.5%. Part of this is covered by the 10% dividend tax credit, but further tax of 22.5% of the gross dividend (32.5% – 10%) must be paid by the shareholder. That is the same as a further 25% of the net dividend.

EDIT: I've paid myself divs up to the higher rate threshold already this year 2015-16. Since the new rates come in in April 2016 then AFAICT I'd be better off taking more this year and paying 22.5% personally than taking it in a later year and paying more. Unless I leave it in MyCo until such time as I'm benched.