Reply to: Ready for 24% Corp tax?

[Old Greg]

National insurance is not income tax. When you don't pay income tax you still get to use the services income tax funds. If you don't pay national insurance you won't have a state pension.. you won't get job seekers allowance, etc.

It's completely different... It's not dodging taxes because you don't get the services these are supposed to pay for. Now if the government is using the money to fund other things in their budget that's their problem. You can't blame the companies/people not paying NI.

But it would be more transparent to roll employers' NIC into employees' NIC and give everyone a corresponding pay increase.

[ladymuck]

National insurance is not income tax. When you don't pay income tax you still get to use the services income tax funds. If you don't pay national insurance you won't have a state pension.. you won't get job seekers allowance, etc.

It's completely different... It's not dodging taxes because you don't get the services these are supposed to pay for. Now if the government is using the money to fund other things in their budget that's their problem. You can't blame the companies/people not paying NI.

That's true.

This is quite an interesting article about NI too

What happens to the money from National Insurance Contributions? - Full Fact

[jayn200]

National insurance is not income tax. When you don't pay income tax you still get to use the services income tax funds. If you don't pay national insurance you won't have a state pension.. you won't get job seekers allowance, etc.

It's completely different... It's not dodging taxes because you don't get the services these are supposed to pay for. Now if the government is using the money to fund other things in their budget that's their problem. You can't blame the companies/people not paying NI.

[CosmicWave]

They can bring in whatever rate they want.... all they are going to do is multiply it with 0, yielding 0.

Go for it Mr.Treasury! It will be fun watching what it yields them

[lecyclist]

1. It's never going to happen. The UK cannot deviate too far from the EU CT mean due to transfer pricing incentives.
2. If it does happen (as part of an EU trend on CT uplift) there will be loopholes and exemptions.

[d000hg]

24 is not exactly that high and one wouldn't be surprised to see small businesses continue to get relief of various forms.

[workstation]

Ah, yes, I thought that might be it.

Remember that the employer NI portion isn't subject to the other taxes, so from those figures you get (13.8+12+20)/(100+13.8)=40.25

Debatable how to account for apprenticeship levy.

[eek]

How have you arrived at a figure over 45% there?

I'll do the work for you but it's very simple you look at the tax rates see National Insurance rates and categories - GOV.UK and add them together.

20% income tax
12% Employees NI
13.8% Employers NI

[workstation]

Employers NI is only so high because it's the only employment tax that can be hit without people squealing (as they don't see it).

And yes it does need reforming but you really don't want to reveal to people that the actual rate of tax on employment isn't 32% (income tax + NI) in tax but actually over 45%..

How have you arrived at a figure over 45% there?

[ladymuck]

Employers NI is only so high because it's the only employment tax that can be hit without people squealing (as they don't see it).

And yes it does need reforming but you really don't want to reveal to people that the actual rate of tax on employment isn't 32% (income tax + NI) in tax but actually over 45%..

Why not reveal that though? We all pay our taxes and expect certain services in return.

So, why not show people just how much it costs to provide them? The millions for this and billions for that means nothing to most people. Saying that the effective rate of tax on your income is x% is more impactful.

[eek]

It's "hitting" companies because for many years companies have been dodging NI liabilities (and workers rights) by using contractors when they should have been taking on permanent staff. The 13-odd% NI is a huge tax on employment and if you don't have to pay it, why would you?

Root and branch reform is what's needed but we will only ever get tinkering around the edges because a clear and easily understandable tax system is not in the interests of TPTB

Employers NI is only so high because it's the only employment tax that can be hit without people squealing (as they don't see it).

And yes it does need reforming but you really don't want to reveal to people that the actual rate of tax on employment isn't 32% (income tax + NI) in tax but actually over 45%..

[mattster]

I'll say it again. Tax divis at full income tax rate but treat proprietary directors as sole traders as far as NIC is concerned.

Sunak has already strongly hinted that he is coming for self-employed NICs.

[ladymuck]

This is what I found most contractors struggle to understand: the IR35 reform is not about hitting contractors; it's about hitting those companies who use contractors the way they're not supposed to.

That there are effects on contractors is inevitable, but contractors should stop thinking IR35 is purely designed and aimed at damaging them.

It's "hitting" companies because for many years companies have been dodging NI liabilities (and workers rights) by using contractors when they should have been taking on permanent staff. The 13-odd% NI is a huge tax on employment and if you don't have to pay it, why would you?

Root and branch reform is what's needed but we will only ever get tinkering around the edges because a clear and easily understandable tax system is not in the interests of TPTB

[PCTNN]

The IR35 reforms are about discouraging companies from fully outsource employees - it isn't going anywhere.

This is what I found most contractors struggle to understand: the IR35 reform is not about hitting contractors; it's about hitting those companies who use contractors the way they're not supposed to.

That there are effects on contractors is inevitable, but contractors should stop thinking IR35 is purely designed and aimed at damaging them.

[ladymuck]

There's no likelihood of 24% CT in the near term. Maybe in five or more years' time it could creep towards it.

As mentioned in the thread on this topic in general, the government are 'leaking' ideas and seeing which ones get the least noise so they know to safely implement those.