Self Employed Payment Scheme

Hi mate, see my answer above. My tax I draw out is all paid on my tax return. One bit says "tax from self employment" the other bit says "dividends from UK Companies". All this is filled in by my accountant.

 

TBF, neither did I. Like most people I pay an accountant to deal with all that and I just pay the bill.

 

I'm not sure I understand this dividend v PAYE argument. There was a tax expert on LBC explaining it and to be honest didn't really answer the layman questions.

He made it sound like a bit of a tax dodge but I'm not sure it is that black and white.

 

I have however just realised that they have paid March to May while furlough goes on until August!!

and they’ve still not fixed self employed by limited company either... *****

self employed forgotten about again it seems

 

Ok, if you pay by salary then your salary will be subject to PAYE at 20% if you pay at basic rate on anything above the personal allowance of £12,500 pa. There will also be employees 12% on anything above £9,504 pa and employers NI of 13.8% on anything above £8,784 pa. The salary & employers NI get corporation tax relief at 19%.

If you were to pay the same amount in purely dividends then after the personal allowance of £12,500 there is a dividend allowance of £2,000. Anything above that is taxed at 7.5% for a basic rate taxpayer. Dividends do not attract corporation tax relief.

Example time using £30,000 to be extracted from a company.

Salary would be £30,000 less £12,500= £17,500.00 PAYE at 20% = £3,500.00.
National insurance Emees is£30,000 less £9,504 @ 12% = £2,459 EMR is £30,000 less £8,784 @ 13.8% = £2,928

Total tax & Nic is £3,500 + £2,459 + £2,928 = £8,887

Net salary to be drawn £30,000 - £3500 - £2,459 = £24,041

Dividends would be £30,000 - £12,500 = £17,500 -dividend all £2,000 = £ 15,500 at dividend tax rate of 7.5% = £1,163

Dividends do not get Corporation tax relief so that would be £30,000 @ 19% = £5,700

Total tax is £1,163 & £5700 = £6,863

Net amount available to be paid is £30,000 - £1,163 = ££28,837

There is a saving in total tax and also an increase in the net amount avaiable to be drawn.

Apologies for any mistakes but I rushed that out and I haven't checked it. Also none of the above information is confidential.

 

Thank you for the explanation. I'm glad I'm not an accountant but then again if I was I wouldn't have needed an idiots guide.

 

So basically you avoid paying around £5000 in taxes? On £30k. Or have I completely misunderstood?

 

Err misunderstood

The tax saving is about £2k. It’s the net income to look at.

 

You know how easy I get confused by now.

 

Avoid v Saving. That's a very important distinction

 

No Mario it isn't Avoid v Evade is the important distinction.

“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” Denis Healey

 

I knew that, I was only teasing. I just thought it was quite funny that SuperTyke used the word avoid but you used saving in your reply to him.

 

Ah a choice of words to have a subliminal impact upon the reader ? My cunning plan ? Naaaaahhhhhhh, I'm not clever enough for that, I'm no Dominic.

 

I logged on filled details in .
3 days later confirmation saying this being processed ,will be paid in nx 3 days.
Thing is it was paid into my account already.
HMRC well done .

 

I reckon you're clever enough to come up with a better excuse than 'my eyes were bad so I drove 60 miles to test them'

 

Err Err Err. Totally forgot about the corporation tax on top the 2k saving.