drew
Drew
Well to make it simpler then, consider it as money in and money out!
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[Finance] Self employed to receive 80% of income from the Gov’t too
- Thread starter Weststander
- Start date
Well to make it simpler then, consider it as money in and money out!
Wrong-Direction
Well-known member
- Mar 10, 2013
- 13,547
I have NHS salary coming in too so do you reckon it's not worth going for universal credit and hold on for the payment in June?
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Can I jus say one thing to everyone reading this thread.
The Government has stated that they will be in contact with you in relation to getting payments to you all.
Please be extra virulent for scam emails and scam phone calls asking for personal information and bank details asking you to release information to them - It is 99% certain that the initial contact and will be by post. It is possible that subsequent correspondence may be by telephone but again be careful with any call backs about releasing personal information.
Scammers will realise that people will more likely to be off their guard when they are waiting for such payments to come through. So please everyone be on your guard for such scams during these coming months.. It would be very easy to release bank details when you are truly anticipating a payment from HMRC or DWP
The Government has stated that they will be in contact with you in relation to getting payments to you all.
Please be extra virulent for scam emails and scam phone calls asking for personal information and bank details asking you to release information to them - It is 99% certain that the initial contact and will be by post. It is possible that subsequent correspondence may be by telephone but again be careful with any call backs about releasing personal information.
Scammers will realise that people will more likely to be off their guard when they are waiting for such payments to come through. So please everyone be on your guard for such scams during these coming months.. It would be very easy to release bank details when you are truly anticipating a payment from HMRC or DWP
LOL. [emoji23]
- Thread starter
- #305
There’s no harm in trying. But he patient, they’re inundated.
That's what I've been advising people. May as well try to get a claim in but it's probably not easy!
Also it still seems that many people haven't done the mortgage holiday thing yet. That could make a really big difference to a lot of people and it's very easy to do.
- Thread starter
- #307
The beginning of June, but they’re aiming for earlier if at all possible, backdated to 1 March. If you can’t make that financially, apologies for mentioning this again, but claim for SSP and Universal Credit.
- Jul 10, 2003
- 27,364
I think I understand now you've made it simpler.
You think turnover has some relationship to PAYE income. Everyone else on this thread (including me) seems to think profit relates to PAYE income. I think that is where the misunderstanding is
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- Thread starter
- #309
Plus this slipped under the radar - on Tuesday the government provided a Hardship Fund to councils, to relieve the vulnerable and households really struggling due to this crisis from council tax. Obviously a big monthly outgoing for most households.
I suspect people need to contact their council, if they can find someone who’s working.
If they prove absolutely useless and your claim can later be fully justified, perhaps stopping the monthly DD is the ultimate tool?
Yeah if push comes to shove then cancelling DDs (so you can buy food) and dealing with the fallout later makes sense. It's not the time to worry about your credit rating that's for sure.
Pavilionaire
Well-known member
- Jul 7, 2003
- 31,093
There seems to be a misconception about directors dodging tax through dividends. Employees pay 32% in tax and NI, directors pay 19% corporation tax, 7 1/2 dividend tax but they don't get employer's pension (so upwards of 3%), the have running costs of ltd co (about 2%) and no holiday pay / sick pay. Indeed, the 19% CT plus 32 1/2 div tax for higher rate directors exceeds the 42% tax and NI for employees.
Successive governments have actively supported incorporation because companies are transparent, sole trades are not, so last night's anouncements amount to a betrayal. It would seem Britain is now shut for business.
Successive governments have actively supported incorporation because companies are transparent, sole trades are not, so last night's anouncements amount to a betrayal. It would seem Britain is now shut for business.
drew
Drew
I think I understand now you've made it simpler.
You think turnover has some relationship to PAYE income. Everyone else on this thread (including me) seems to think profit relates to PAYE income. I think that is where the misunderstanding is
The relationship is money in. After that they both go off at different tangents.
Going back to the self employed driving instructor. An AA instructor will have a weekly franchise fee of £190, circa £800 per calendar month which is included as an expense from a tax point of view. They then have, for example, rent of £1000 per month. Let's assume their total income/turnover is £3,125.
Leaving everything else aside, their profit is £2325 so they'll get £1860 leaving them £860 after paying the mortgage.
The PAYE employee will get 80% of their salary, ie £2500 and, for argument sake they pay £1000 rent as well, that leaves them £1500.
Now there are a hell of a lot of other variables but I hope the above clarifies why, just because a figure of 80% is mentioned by the chancellor, it doesn't mean both sectors are being treated the same. Hell, it would probably be impossible to treat all self employed the same!!!
beorhthelm
A. Virgo, Football Genius
- Jul 21, 2003
- 35,827
overlooked that business pays corporation tax and directors could be paid from the business. many chose to take low/no pay and a dividend instead.
He didn't overlook it at all. The complete opposite. He just explained how dividends are taxed. Some people seem to think that they are free money which is ludicrous.
Plus if you don't take a wage out of your company then you pay more Corporation Tax anyway. Plus you can't physically take as much money out of the company. Unless you pay a higher dividend, which you get taxed on..........
- Jul 10, 2003
- 27,364
I will do this the once, then I'm out. In your example.
The driving instructor has a turnover of £3,125 per month and expenses of £800 per month (assuming that covers petrol, wear and tear and all other sundries)
This leaves a Profit/Income of £2,325
The Government is going to pay 80% of that - £1,860
The PAYE employee is getting income of £3,125 per month and expenses of £0.
This leaves Income/Profit of £3,125
The Government is going to pay 80% of that - £2,500
The PAYE employee will get more from the Government, because his income is greater than the Driving Instructors profit. Whether he spends that income on rent, mortgage or the occasional hour of 'Lawrence Dallaglio' is neither here nor there
If the PAYE's Income was the same as the Driving Instructors Profit, the Government would pay them the same, but in your example the PAYE person had a larger Income/Profit to start with.
And, if I where you, I would stick with the AA and not go independent
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Pavilionaire
Well-known member
- Jul 7, 2003
- 31,093
I'm in a partnership. My share is 45%. My partner gets 55%.
I do ALL of the work. My partner does nothing. He hasn't invested a penny.
Why do I put up with this? Because my partner is HMRC.
I do ALL of the work. My partner does nothing. He hasn't invested a penny.
Why do I put up with this? Because my partner is HMRC.
schmunk
Centrist Dad
That's not correct.
£100 profit for an employer - £12.12 zooms away in employer NI, leaving a gross £87.88 salary, less 42% PAYE and NI = £50.97 net in pocket
£100 profit for a Ltd Co. contractor - 19% CT leaves £81 payable as dividends, less 32.5% income tax = £54.68 net in pocket
It gets worse if you consider the overall picture for an employee vs. a Ltd Co. contractor - e.g. if there is a £100k budget for a worker's services:
Employee:
£11,080 goes in employer NI, leaving £88,920 gross salary. Standard PAYE and NI deductions leave a net £60,113 for the employee's bank account.
Contractor:
First, pay £8,632 in salary to hit the NI contribution threshold - but pay no NI! This leaves £91,378 of profits.
After 19% CT, this leaves £74,008 payable as dividends. With the balance of the personal allowance, £2,000 dividend allowance and much taxed at the 7.5% basic rate, this gives a total £12,770 of tax, leaving net dividends of £61,238.
The salary plus dividends gives a net £69,870 for the contractor's bank account. This is £9,857 more than the employee receives for potentially identical work.
Contractor with a non-working spouse/partner:
FIrst pay each person £8,632 salary as above. This leaves £82,736 of profits.
After 19% CT, this leaves £67,016 payable as dividends - paid equally to the two shareholders. With the balance of two personal allowances, two £2,000 dividend allowances and the balance taxed at the 7.5% basic rate, this gives tax of £2,073 each (total £4,146), leaving net dividends of £62,870.
The two salaries plus the dividends gives a net £80,134 for the contractor's bank account. This is £20,021 more than the employee receives for potentially identical work.
Yes, employees may be receiving pension contributions or other benefits, but these would come out of the overall budget, reducing the employee salary even lower.
This is why bums-on-seats contractors (or indeed shovels-on-tarmac contractors) are an outrage and HMRC has finally, rightly, done something good to address it.
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- Jul 10, 2003
- 27,364
Don't forget, it's the cumulative totals of the last 3 years that define the qualifying (as I understand it).
*edit* Just realised, that may be wrong. I haven't actually seen it definitively explained as majority of earnings for last tax year or last 3, for qualifying - Anyone ?