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Backlash forces UK to drop Self-Employed Tax Plan

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U.K. Scraps Tax Plan, Leaving Budget Hole and Credibility to Fix

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U.K. Chancellor of the Exchequer Philip Hammond scrapped a plan to increase tax on the self-employed, after a storm of criticism from legislators in his own ruling Conservative Party.

 

Hammond was accused of breaking a manifesto pledge not to hike national insurance contributions, made by the Tories before they won the 2015 election, when he announced the proposal in the Budget on March 8. Conservatives said the move was a tax on entrepreneurs, as well as a breach of voters’ trust.

With enough lawmakers voicing displeasure to threaten Prime Minister Theresa May’s slender majority of 17, the government backed down exactly a week after the measure was first unveiled.

 

Was this tax going to affect Nail technicians and pet grooming industry?

Edited by Fairyland

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Meanwhile the binning of salary sacrifice on benefits in kind for paye mugs (one of the few tax breaks available to salaried workers) passes unnoticed. The direct link between the budget and the increase in council tax also seems to have passed people by.

Still at least the self employed won't have to pay an additional 1% on profits above 8 grand to prop up a service they're far more likely to use than salaried staff with company pensions and healthcare plans yet who still have to pay a higher ni premium. In what other insurance product do you get a cheaper premium the higher risk you are? 

We must protect the wealth creators after all.

Shambles of a government and a Shambles of a country that voted it in. 

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2 hours ago, zugzwang said:

Early election in the offing?

Looks like they are starting to think that way. Nicola Sturgeon was having a poke at May yesterday about her not having being elected. As the Brexit negotiations get down and dirty, and the pain we are facing becomes unavoidably obvious, it's going to be harder and harder to have a leader rubber stamping all this who hasn't faced the electorate.

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1 hour ago, hotairmail said:

The Establishment seem to be gunning for the tories, sniping at every opportunity. FT, BBC, Bloomberg et al.

Barely disguised support this time around for Sturgeon and her 'valid position' (where was that last time when the SNP were roundly condemned by all the mainstream media with Project Fear v1.0?), then National Insurance, electoral expenses and new by-elections.....they'll do anything to try and stop Brexit. 

They're are all out to get you.

s'funny the supporters of that 70s throwback Corbyn say exactly the same thing! :lol:

Perhaps the reality is we have some of the most ineffectual, uninspiring and incompetent leaders than any major western nation has ever had. I was speaking to a customer in Germany today and he told me they were laughing about David Davis not having any idea how much it would cost Britain if there was no EU deal to be had.

Difficult to know whether to laugh or cry at this stage.

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1 hour ago, Hullabaloo82 said:

Meanwhile the binning of salary sacrifice on benefits in kind for paye mugs (one of the few tax breaks available to salaried workers) passes unnoticed. The direct link between the budget and the increase in council tax also seems to have passed people by.

Still at least the self employed won't have to pay an additional 1% on profits above 8 grand to prop up a service they're far more likely to use than salaried staff with company pensions and healthcare plans yet who still have to pay a higher ni premium. In what other insurance product do you get a cheaper premium the higher risk you are? 

We must protect the wealth creators after all.

Shambles of a government and a Shambles of a country that voted it in. 

Why should taxes rise for any worker? Does it matter if they are an employee or a limited company director? How about a cull of enormous, out of control state spending and replace it with tax reductions for all workers?


Governments are terrified of rocking the boat for the leeches and losing votes. A government that stood up for workers, eased their burden and made life tougher for the leeches, would get my vote. They would probably clean up at any general election. The current major political parties either lack the courage or they are socialists. Simple as that.

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23 minutes ago, Ash4781 said:

hmm time for a cabinet reshuffle

Won't work. The problem is Mother Theresa. Obdurate, vindictive and has a low emotional intelligence. No amount of cabinet tinkering is going to change that.

'Bloody difficult woman,' as Ken Clarke observed famously.

ADAMS20170316-large_trans_NvBQzQNjv4Bq8j

 

 

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1 hour ago, Untoward said:

Why should taxes rise for any worker? Does it matter if they are an employee or a limited company director? How about a cull of enormous, out of control state spending and replace it with tax reductions for all workers?


Governments are terrified of rocking the boat for the leeches and losing votes. A government that stood up for workers, eased their burden and made life tougher for the leeches, would get my vote. They would probably clean up at any general election. The current major political parties either lack the courage or they are socialists. Simple as that.

It's a question of fairness. NI (symbolically at least) pays for our social safety net, including our health service. Why should I be expected as a salaried employee to pay 12% of my gross earnings above the threshold whilst a self employed person pays 9% when we both get the same service?

I can understand tax reliefs to reflect the increased risks taken by the self employed and the lack of benefits in kind. But here's the thing; i have death in service cover, life cover, income protection, a company pension, a health plan. My employer also chips in extra nics. All as part of my remuneration packages. Most employees will have a combination of the above. 

Most self employed people don't and are therefore more likely to rely on the state (ie the rest of the country) in the event of a catastrophe. The premium should reflect the risk. After all, this is insurance were talking about. 

Thing is tax is reducing in principle. Income tax free allowance is higher. Corporation tax is down. State subsidies to local government and the NHS are lower. Government is looking to crack down on benefits.

Have we entered nirvana, an oasis where the strikers thrive and the leeches get what they deserve? No, in practise the costs just get passed on through increased vat, council tax or other ways (the government back tracked on ni but got their salary sacrifice and cuts to dividend tax allowance through). 

We Need an honest discussion about what we want as a country where tax is concerned. By all means Let's cut tax but don't kid yourself you won't pay for it in other ways. 

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2 hours ago, stop_the_craziness said:

If they can U-Turn on this, can they do the same with section 24??????

If they were u-turning on that they would have done a long time ago ..

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6 hours ago, Nabby81 said:

If they were u-turning on that they would have done a long time ago ..

Plus, they already have a pretty major budget black hole that won't be filled until the Autumn.  They can't afford to u-turn on BTL now.

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from the rhetoric though they still seem keen to target the self employed. I don't know the tax system well enough but presume they started from a point of let's close this x gap (I didn't see Phils reasoning- it appears no check was done back to the manifesto ) here are some options to do it - one being NICs. 

Edited by Ash4781

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9 hours ago, Hullabaloo82 said:

It's a question of fairness. NI (symbolically at least) pays for our social safety net, including our health service. Why should I be expected as a salaried employee to pay 12% of my gross earnings above the threshold whilst a self employed person pays 9% when we both get the same service?

I can understand tax reliefs to reflect the increased risks taken by the self employed and the lack of benefits in kind. But here's the thing; i have death in service cover, life cover, income protection, a company pension, a health plan. My employer also chips in extra nics. All as part of my remuneration packages. Most employees will have a combination of the above. 

Have we entered nirvana, an oasis where the strikers thrive and the leeches get what they deserve? No, in practise the costs just get passed on through increased vat, council tax or other ways (the government back tracked on ni but got their salary sacrifice and cuts to dividend tax allowance through). 

 

Don't forget you have sick pay, holiday pay, paternity benefits, a resolutely safe job, if you've been there for over 2 years, a safe, reliable income, have someone else getting your work for you, etc, etc.

Yes, those ******* self employed, hoovering up everything, it simply isn't fair.

This kind of thinking is what the government want; bickering among ourselves, rather than looking at the proper issues, the swamp of self serving interests in parliament.  

If they had all of the benefits you have in work, you'd have a better argument.  But they don't. 

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10 minutes ago, HairyOb1 said:

Don't forget you have sick pay, holiday pay, paternity benefits, a resolutely safe job, if you've been there for over 2 years, a safe, reliable income, have someone else getting your work for you, etc, etc.

Yes, those ******* self employed, hoovering up everything, it simply isn't fair.

This kind of thinking is what the government want; bickering among ourselves, rather than looking at the proper issues, the swamp of self serving interests in parliament.  

If they had all of the benefits you have in work, you'd have a better argument.  But they don't. 

I wish everyone would stop mentioning holiday pay. It has NOTHING to do with national insurance and is just clouding the issue.

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11 minutes ago, HairyOb1 said:

Don't forget you have sick pay, holiday pay, paternity benefits, a resolutely safe job, if you've been there for over 2 years, a safe, reliable income, have someone else getting your work for you, etc, etc.

Yes, those ******* self employed, hoovering up everything, it simply isn't fair.

This kind of thinking is what the government want; bickering among ourselves, rather than looking at the proper issues, the swamp of self serving interests in parliament.  

If they had all of the benefits you have in work, you'd have a better argument.  But they don't. 

Plus unemployment benefits - many self employed have significant downtime, not through choice, fat chance of claiming even when the work is not there unless for a significant period of time and the company is effectively wound up - which then would need all the additional costs to restart again if the work came back on stream. So, instead, most self employed just suck it and and trick along with no recourse to any unemployment benefits in the meantime.

If it such a good deal then anybody in a permanent position knows exactly what to do - join the self employed labour force.

 

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3 minutes ago, CunningPlan said:

I wish everyone would stop mentioning holiday pay. It has NOTHING to do with national insurance and is just clouding the issue.

It doesn't, but what I am alluding to, is that you simply don't have any safety net as a self employed person, that you do as an employed person, so that risk has to be worth something, and I think 2% is kind of small when you consider the bigger picture.

 

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1 minute ago, HairyOb1 said:

It doesn't, but what I am alluding to, is that you simply don't have any safety net as a self employed person, that you do as an employed person, so that risk has to be worth something, and I think 2% is kind of small when you consider the bigger picture.

 

But the gap is 15%. Employers National Insurance is, in reality, paid for by the employee.

I have been either self employed or a director of my own company (for many years both at the same time) for 30 years and think that the backlash against this was foolish.

In common with most directors, I pay myself a reasonable wage and take the rest via dividends. This was hit with an additional 6% tax last year but little was said about it, mainly because most of us knew we were still getting a good deal.

For the sole trader, there are so many tax breaks it is ridiculous. Admittedly there are more for the truly self employed (i.e. running a proper business) as opposed to the 'self employed' driver but they are still there.

Any decent accountant will be able to wipe several thousand of your taxable profit without breaking a sweat.

No sick pay - well SSP is only £88 per week. Based on an average sick leave of 5 days per year (less for the self employed) that is peanuts.

No maternity / paternity pay? If your spouse is employed, they will get this. If they aren't, employ them to do your books and answer the phone if you think they may be pregnant. Job done.

Job security - how secure is any job? In fact, if you are any good at what you do you will have much better job security as a self employed person - after all, you won't put yourself first in line for the chop if there is a drop in demand.

The killer used to be pensions. That has now been equalised. And class 2 has been removed. The Gov't missed a trick in that they should have raised class 4 at the same time as equalising the pensions and scrapping class 2, rather than give the jam today and the pain tomorrow.

Bottom line is that the self employed have been getting away with a good thing for ages and it is time we closed the gap. My concern is that, with this particular method now dead they will find something more damaging to go for. They are already talking about banning spouses for working for MP's. How long before they roll that out to self employed people?

It was a fair increase. I wonder if whatever they do to replace the missing £2bn will be equally fair? 

 

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7 minutes ago, HairyOb1 said:

It doesn't, but what I am alluding to, is that you simply don't have any safety net as a self employed person, that you do as an employed person, so that risk has to be worth something, and I think 2% is kind of small when you consider the bigger picture.

 

The lack of a safety net is exactly why you should pay at least an equal share of ni.

It's all about the risk reward ratio. As an employee, there's a huge opportunity cost to me to not being self employed. I frequently see temporary roles offering 3 - 400 quid a day in my profession, significantly more than I am paid. Colleagues at my firm have gone over to being self employed contractors and can take several months off at a time. However, there is no guarantee that the firm won't decide not to engage them next year.

I don't take this option because I have a kid to feed and a mortgage. I have a lower risk appetite and therefore receive a lower reward. 

This applies in almost anything.  A fixed interest bond will offer a low rate of return. It's a safe bet. It also applies to your insurance premiums. Get a few speeding tickets or have an accident and your car insurance goes up. 

In the case of self employment you're taking a risk which should lead to a greater reward (more profit, the chance to set your own pay, etc). But the risk you take should also be reflected in what you pay to protect against disaster. That's how insurance works (it is national INSURANCE after all).

If the risk reward ratio isn't working out for you, don't be self employed.

The people who I would feel really sorry for are uber/Deliveroo guys who's self employed status is just a ruse by their employer to get out of paying for proper benefits. 

Also, if we're so behind self employed people here, why not uproar about IR35? Bit of a double standard don't you think? 

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5 minutes ago, CunningPlan said:

But the gap is 15%. Employers National Insurance is, in reality, paid for by the employee.

It isn't, sorry, but it isn't. Not unless you are a one man band Ltd.

5 minutes ago, CunningPlan said:

I have been either self employed or a director of my own company (for many years both at the same time) for 30 years and think that the backlash against this was foolish.

In common with most directors, I pay myself a reasonable wage and take the rest via dividends. This was hit with an additional 6% tax last year but little was said about it, mainly because most of us knew we were still getting a good deal.

As do I.  Although I don't pay a reasonable wage.

5 minutes ago, CunningPlan said:

For the sole trader, there are so many tax breaks it is ridiculous. Admittedly there are more for the truly self employed (i.e. running a proper business) as opposed to the 'self employed' driver but they are still there.

We get it better than anyone else really.

5 minutes ago, CunningPlan said:

Any decent accountant will be able to wipe several thousand of your taxable profit without breaking a sweat.

No sick pay - well SSP is only £88 per week. Based on an average sick leave of 5 days per year (less for the self employed) that is peanuts.

Nail on head: Less for Self employed. They can't afford it.  I also used to get full pay for sick leave as a permie, as do most.

5 minutes ago, CunningPlan said:

No maternity / paternity pay? If your spouse is employed, they will get this. If they aren't, employ them to do your books and answer the phone if you think they may be pregnant. Job done

So, manipulate the system.  You will still not get it as a self employed person.

5 minutes ago, CunningPlan said:

Job security - how secure is any job? In fact, if you are any good at what you do you will have much better job security as a self employed person - after all, you won't put yourself first in line for the chop if there is a drop in demand.

Very secure, if you've been there 2 years or more.  Less chance of being fired without reason, if work dries out, you get made redundant, have access to benefits straight if you're made redundant.

5 minutes ago, CunningPlan said:

The killer used to be pensions. That has now been equalised. And class 2 has been removed. The Gov't missed a trick in that they should have raised class 4 at the same time as equalising the pensions and scrapping class 2, rather than give the jam today and the pain tomorrow.

Has it? I don't think it has, apart from State pension, which we all know will not be there in 20 years.

5 minutes ago, CunningPlan said:

Bottom line is that the self employed have been getting away with a good thing for ages and it is time we closed the gap. My concern is that, with this particular method now dead they will find something more damaging to go for. They are already talking about banning spouses for working for MP's. How long before they roll that out to self employed people?

We?  I thought you were already milking the system yourself? ( I pay myself a reasonable wage and take the rest via dividends....most of us knew we were still getting a good deal.)

5 minutes ago, CunningPlan said:

It was a fair increase. I wonder if whatever they do to replace the missing £2bn will be equally fair? 

I simply don't agree with you.  I guess they might go after directors of small IT companies who mask their income by paying their wives for non existent work and share profits with them via dividends....

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14 minutes ago, HairyOb1 said:

It isn't, sorry, but it isn't. Not unless you are a one man band Ltd.

Quote

It really is. Say I am going to employ a machine minder. I work out that I can charge him out at £40 / hour. Apportion overhead and profit and I can afford a cost of £20 / hour for that staff member.

He is only going to be at work for 227 days out of the 260 working days in the year (holidays + assumed sick), so we now have a maximum cost I can afford of £17.40 per hour.

I have to pay employers NI at 13%, so the most I can afford to pay the employee is £15.40 per hour. If I can't get someone for that rate then the position is unviable.

Am I right in assuming you are a self employed contractor?

 

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16 minutes ago, CunningPlan said:

But the gap is 15%. Employers National Insurance is, in reality, paid for by the employee.

I have been either self employed or a director of my own company (for many years both at the same time) for 30 years and think that the backlash against this was foolish.

...

It was a fair increase. I wonder if whatever they do to replace the missing £2bn will be equally fair? 

 

I agree.  

They should try to harmonise tax levels -- how come the base rate of tax is about 40%* for employees, 30% for sole traders and 25% for directors?

10 hours ago, Hullabaloo82 said:

It's a question of fairness. NI (symbolically at least) pays for our social safety net, including our health service. Why should I be expected as a salaried employee to pay 12% of my gross earnings above the threshold whilst a self employed person pays 9% when we both get the same service?

See this is the problem.  As a salaried employee you'll find that your employer pays some NI on your behalf.  Essentially, for every £100 you earn they've had to put £116 to one side, and have paid the £16 to HMRC without even telling you.  With the £100 that's left, they then pay out another £12 in NI and £20 in income tax.  So, £28 in NI all together for every £100 you see on your payslip.

Sole traders only pay the single % fraction of salary (9%), plus £150 a year class 4.  

IMO this u-turn is actually because some senior people have had a hurried call with PH about how important it is to keep obfuscated the real taxes people pay.  Currently, the mob thinks that taxes are either 20%, 40% or 45% for some extra-wealthy.  Even though it is obviously more than that from a simple glimpse at a payslip, that is what people think.

But base rates are at about 40%.  They don't want people to know that.  Or that directors at base rate pay 25% -- lets not highlight that.  Or that higher rate taxpayers actually are taxed at about 50% -- not double the base rate, but only higher by a quarter.  Or that higher rate directors pay tax at about 45% -- only 5% more than the base rate payers.  Definitely don't want the proles to know about that.

[*if you read the numbers I've given elsewhere you'd be forgiven for thinking it would be 48%, but it is only 41% calculated as % from the £116 starting point (which is what you should think you should be getting) not from £100.  There is a similar calc for higher rate payers, which works out at 50% of cost-to-employer -- this is lower than you'd think because employee's NI is regressive -- the tax burden decreases with increasing wealth.  Similarly, for directors they've had to put aside £125 for every £100 that they want to 'pay' themselves (this time in corporation tax)]

 

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