Reply to: Pay rise

[BlasterBates]

It won't be a problem because the extra money goes back to the government anyway. The whole point of this is stop "Daily Mail" articles on contractors ripping off tax payers.

[Fred Bloggs]

Hmm....

£100,000 in

Less £43,000 Salary + Dividends (personal tax on that is a lick over £2000)
Less £10,000 into a pension
Less £8,160 Salary to a partner
Less £2916 childcare vouchers
Less £1000 to the accountant
Less £1000 for other stuff like phone, insurance, hosting, christmas party, etc
Less £16,000 in Corp Tax

Only leaves £18000 or so for retained earnings, and I haven't included stuff like travel expenses, hotels there.

I suspect a good chunk of limited company contractors dont go into higher rate tax. £18,000 left over there isn't 'a lot of money' and would dwindle pretty quickly during a prolonged spell on the bench.

Sounds pretty typical, for me a GBP 100k gross would be something like -

GBP 11k salary
GBP 10k divis (half to Mrs Bloggs)
GBP 40k pension
GBP 24k expenses for travel and fuel
GBP 700 for accountant and FreeAgent

Not a lot left for corporation tax to be paid on there really.

[chopper]

Only 20k tax on a £100k? Corporation tax is going to be £18k or so must be that a lot of money is being left in the company to avoid HRT, fine for those who don't have high living expenses or is that the typical majority?

Hmm....

£100,000 in

Less £43,000 Salary + Dividends (personal tax on that is a lick over £2000)
Less £10,000 into a pension
Less £8,160 Salary to a partner
Less £2916 childcare vouchers
Less £1000 to the accountant
Less £1000 for other stuff like phone, insurance, hosting, christmas party, etc
Less £16,000 in Corp Tax

Only leaves £18000 or so for retained earnings, and I haven't included stuff like travel expenses, hotels there.

I suspect a good chunk of limited company contractors dont go into higher rate tax. £18,000 left over there isn't 'a lot of money' and would dwindle pretty quickly during a prolonged spell on the bench.

[MPwannadecentincome]

Hehe, hadn't considered it that way.

Previously contractor charged £100k and suffered £20k in tax. Cost to department budget = £100k.

Now contractor charges £120k and suffers £40k in tax. Cost to department budget = £120k.

Only 20k tax on a £100k? Corporation tax is going to be £18k or so must be that a lot of money is being left in the company to avoid HRT, fine for those who don't have high living expenses or is that the typical majority?

[Maslins]

Actually, if you were being cynical, you could suggest that this is effectively the Treasury slipping through a cut to the budgets of other departments, under the guise of fairness. Yeah, I'm cynical.

Hehe, hadn't considered it that way.

Previously contractor charged £100k and suffered £20k in tax. Cost to department budget = £100k.

Now contractor charges £120k and suffers £40k in tax. Cost to department budget = £120k.

UK PLC overall no better/worse off, but the specific departments then need to find cutbacks elsewhere just to keep same overall level of spending, whilst government income goes up.

[Lambert Simnel]

The ONLY thing this has accomplished is optics. The Government has made themselves look "more fair" in their own eyes, and in the eyes of certain people in the press. That is, until people start looking at the rates compared to what employees are paid and say, "Hey, that's not fair, either!"

It's all stupid.

Actually, if you were being cynical, you could suggest that this is effectively the Treasury slipping through a cut to the budgets of other departments, under the guise of fairness. Yeah, I'm cynical.

[northernladuk]

No. They just become market rates and the level playing field continues. To say such a short post on the whole shooting is optimistic is an understatement.

[radish2008]

Could this be a good thing ?

Higher rates in PS to offset the tax mean that those jobs become more attractive.

Contractors start to move into PS.

Private sector rates go up to attract contractors back.

We end up earning more.

[WordIsBond]

Their objective is to make everybody pay tax.

In this case, everybody does. They've increased the tax on contractors but the contractors aren't the ones paying it, it is the Government.

That means everyone pays -- the taxpayer, those who use Government services, everyone.

The ONLY thing this has accomplished is optics. The Government has made themselves look "more fair" in their own eyes, and in the eyes of certain people in the press. That is, until people start looking at the rates compared to what employees are paid and say, "Hey, that's not fair, either!"

It's all stupid.

[northernladuk]

I thought we only got a pay rise when the budget is kind to us?

[Alan @ BroomeAffinity]

I don't think the Treasury ever said they were trying to minimise costs. You're putting those words into their mouths.

Their objective is to make everybody pay tax. Contracting and all sorts of working tax credits mean half the population are getting their jobs subsidised. The Revenue want people to pay their own way and not leach off them. That means costs go up and that inevitably includes costs for other government departments.

You're putting words in my mouth. I never said that was their stated aim, but that it was an inevitable by-product.

[Cirrus]

As Chris says, basic stuff. It was the first thing I, and many others, thought when it was announced. The treasury, however, seemed not to realise.

I don't think the Treasury ever said they were trying to minimise costs. You're putting those words into their mouths.

Their objective is to make everybody pay tax. Contracting and all sorts of working tax credits mean half the population are getting their jobs subsidised. The Revenue want people to pay their own way and not leach off them. That means costs go up and that inevitably includes costs for other government departments.

[Dan@OrangeGenie]

Some of the PS bodies I have spoken to through Agencies won't bat an eye lid and happily uplift, others tell me they can't pay the current rates.

Balls in the contractors court I say.

[Alan @ BroomeAffinity]

As Chris says, basic stuff. It was the first thing I, and many others, thought when it was announced. The treasury, however, seemed not to realise.

[Maslins]

It's basic supply and demand, GCSE economics stuff!