Just so you know my favorite dropped a bomb shell on us business owners, our tax cut of 2% over the next two years is being spent on the NHS.... so much for being the party of business! And I think we should double the state pension payments, how can someone live on £175 a week!.... I spend that in the pub (5 pints of Guinness and a few quid in the Juke box)!
Again, it's an anomaly of the system that people can 'apparently' do the same thing as their work neighbour but have a completely different tax regime, seen as unfair but in reality the taxman gets similar amounts of money (increasingly so with recent changes to dividend tax). With all the talk of changing the rules to make contractors go PAYE the taxman will not get significantly more money, business will lose flexibility and a number of people will work abroad removing themselves from tax completely. Still, free stuff from Labour will help the expats coming back for medical care
Isn't one of the problems -from a government revenue point of view- that people paid as contractors means that employers are freed from paying NI on them which is approx £4400pa on a £40K salary? In turn the contractor recieves less benifits so is paid more by the company. He/she then spends some or all of this extra income on health/ life insurance. So the actual benifits are covered but the government is left out of the loop? Is it not the governments thought that VAT exemption and contractors expenses also tax deductable reduce their revenue?
It's a bit of a minefield, yes contractors effectively pay less employers and employees NI contributions (remember this money goes into the general tax pot anyway) but they pay similar total income tax as a staff person in similar role on a lower wage (seems unfair perhaps), and have no benefits at all. The tax bill can be further reduced if more is paid into a pension pot (again staff personnel don't have as many options here but are often better catered for at these levels of employment). Contractors will also pay VAT on their services and corporation tax on their company profits which will often (in recent times) end up giving the tax man more revenue. In this case everyone is a winner, tax man gets his cut, client have no worries or liabilities for employee, contractor can have a bit more money in their pocket through a better pension provision. There aren't that many things which are tax deductible to make a big difference on the overall tax bill. Contractors are effectively their own boss and don't have to swallow the corporate BS, which is the main attraction for most.
It's not only employers that are freed from the NI, it's also the contractor.. I pay about £50 a year in NI, just enough to earn a pension credit, but not too much .... and not a cent in Dollars?
These guys (if correct) basically say that contractors make £5500+ more than employees earning £40K, in return for not having the same financial security; slightly less if they pay private sickpay insurance The government loses out £4400+ in NI. https://www.contractorcalculator.co.uk/contractors_earn_more_than_employees.aspx
I used to think that owning my own company and being my own boss would mean not having to do what my boss tells me.... Wrong... I've now got hundreds of them...... they are called customers.
Again with the dollars! $$$$ And they are using old data (probably for a good reason), the rules are different for this tax year and we (company directors) are £3,000 ENGLISH pounds poorer for it.
In the automotive industry (and in my experience) a contractor generally invoices around twice the wage cost that a similar role would pay.
And when I used to run my own departments in much larger companies (like Bosch) I used to double the salary figure to get an employees cost for budgets. By the time you factor in sick and holiday pay, holiday cover, Company NI and other costs it seem to work out correctly.
I'm no expert on this, and maybe we have someone here who works for HMRC/DWP who can comment, but I don't think it's true that "NI contributions go into the general taxation pot", just as it's not true that NI pays for the NHS (a proportion of NI contributions go to NHS funding, but it's only a minor proportion of the NHS costs), or that paying NI has anything to do with entitlement to NHS care. NI pays mainly for the state pension. There's a good discussion (I think) of just how complicated NI is at Wikipedia, and the history is interesting too: https://en.wikipedia.org/wiki/National_Insurance Here's an extract, and the first and last sentences are of particular importance! "As the system developed, the link between individual contributions and benefits was weakened. The National Insurance Funds are used to pay for certain types of welfare expenditure and National Insurance payments cannot be used directly to fund general government spending. However, any surplus in the funds is invested in government securities, and so is effectively lent to the government at low rates of interest. National Insurance contributions are paid into the various National Insurance Funds after deduction of monies specifically allocated to the National Health Services (NHS). However a small percentage is transferred from the funds to the NHS from certain of the smaller sub-classes. Thus the four NHS organisations are partially funded from NI contributions but not from the NI Fund. Less than half of benefit expenditure (42.1%) now goes on contributory benefits, compared with over 65% in 1978–79 because of the growth of means-tested benefits since the late 1970s." The diminishing link between contributions and benefits must affect the attractiveness of the UK from an immigration standpoint.
Don't know, but suspect more than 5% earn more than £80k these days? My point was...the article said the bloke earned £80k and was claiming not to be in the top 50%
