What is a fair salary as we head into the future?

One of the big things I have a problem with is the cost of housing and the fact that a lot of working people are paid benefits to be able to afford to live somewhere. The cost of houses/rents is too high compared to the average wage.
I think Gordon Briwn contributed to this in abolishing tax credits on pensions. This left many people seeing property as an alternative to traditional pensions and pushed up housing costs. For me there's also an argument that an extended period of low interest rates could make this worse as only those who can save will be able to access mortgages.
 
boromike85 said:
High pay doesn't have to equal tax dodging but we know it does, and that definitely includes contractors who seem to think that accepting reduced benefits (which is a falsehood) means they are entitled to not pay tax (especially NI & employers NI) by taking it as dividends. It helps the big businesses and it helps the contractors but it doesn't help the public purse and so shouldn't be allowed. Contractors always forget that they can get annual leave, pension, sick pay etc. but they are supposed to pay themselves it. The arrangement means it isn't their "client" that isn't paying it but their own Ltd.

If contractors are such essential specialists then they should have no problem earning the same amount after tax as they do now by charging a higher rate to cover the higher tax payments.

Tbh, Employers NI is a ridiculous tax that should be scrapped anyway. It's daft to have such a barrier to employment when the money can be collected another way anyway. Keep the money in businesses and employees pockets instead and let them spend it in the economy.
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I know about 10 blokes well who are earning over 100k and about about 50 over 50k, all of them are pretty stand up guys and pay fair tax/ the tax required without loopholes and most are PAYE.

How many of the below do undeclared cash jobs:
Plumbers, builders, electricians, painters, joiners, taxi drivers, window cleaners, babysitters, small shops, markets, bookies, criminals, anyone receiving tips etc etc?

Dividends isn't tax dodging, as you can only pay a dividend if in profit, and if you're in profit you're paying 19% corp tax. Either way, it's getting taxed and you're also losing the benefits of being PAYE, paid holidays, furlough, pension contributions etc etc. Plus you can only get a dividend as a shareholder or a director, and by putting yourself in that position you're putting yourself at exceptional risk, this is what somebody that has never owned or run a company can ever understand. They think they do, but they "get" about 2% of it.

The charging higher rates to enable paying the extra tax doesn't work, all that means is the first guy to put up his rates, is the first to go bankrupt as he gets no work. The guy that undercuts gets all the work but then he goes bust as he's charged too little and not factored in for the rainy day.

With major construction you also get the scenario of only the bigger companies can charge the higher rates, due to only them meeting tender criteria (of having adequate credit) which is a load of balls. This is B/S as it's all their sub-contractors that still end up doing the work, for worse rates, and giving the bigger companies 30-60 day credit, the small companies that "don't have the required credit for the contract", and up being the big companies bank!
The big companies credit actually comes from the smaller companies who give the credit to the company that has stole their work, it's a ridiculous system, but the small contractor has no choice. Then the big company goes bust and takes all those small companies with it. It's all massive, massive risk (especially for the little company, that gets little benefit), and it's probably similar in other sectors.

I'm mainly talking of the guys earning less than 200k, anyone above that should be being audited with a fine tooth comb. It's those we need to concentrate on, those doing cash jobs and the major multinationals funnelling money out of the country to avoid tax.
 
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I.dont see any problem with high salaries or income I do not think they should be financed by the government .

Simply make any payment including dividends over say £250,000 not tax allowable. That way the organisation paying it does pay all of it.
 
Wev1 said:
How many of the below do undeclared cash jobs:
Plumbers, builders, electricians, painters, joiners, taxi drivers, window cleaners, babysitters, small shops, markets, bookies, criminals, anyone receiving tips etc etc?

Dividends isn't tax dodging, as you can only pay a dividend if in profit, and if you're in profit you're paying 19% corp tax. Either way, it's getting taxed and you're also losing the benefits of being PAYE, paid holidays, furlough, pension contributions etc etc. Plus you can only get a dividend as a shareholder or a director, and by putting yourself in that position you're putting yourself at exceptional risk, this is what somebody that has never owned or run a company can ever understand. They think they do, but they "get" about 2% of it.
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Loads of them do undeclared and it's also a problem. I said that already in a previous post.

Dividends is tax dodging if you are declaring £8k income or whatever it is otherwise why wouldn't you declare it all as income? If you compare the total tax for someone paid as a contractor versus the same amount as a PAYE then the PAYE plus the employer will pay more tax than someone contracting and declaring minimum wage and dividends. That isn't fair and anyone that claims to be a socialist whilst using the loophole to pay less tax is a hypocrite. I know your argument is going to involve showing me the tax paid by someone as a contractor versus what they would be on as a permanent but that is a false equivalence. I don't care how much tax you pay as a contractor, the real comparison is how much of the money the "client" is paying goes to the public purse when paying a contractor versus the identical total outlay for a permanent employee on PAYE.

Also, you don't lose any benefits by being a contractor. You are free as a Ltd company to pay your employees, aka you, as much annual leave, sick and holiday pay as you want to. You have chosen not to by declaring all of your income as a dividend instead in order to only pay 19% tax instead of 40%+ Employers NI. If it wasn't the case then it wouldn't happen.

I don't know how you structure your accounts so anywhere I say "you" above I mean contractors in general. I also don't blame you for doing it because the system allows you to. The system is to blame, not the users of the system. I do maintain that it is hypocritical to complain about other's tax dealings while structuring your own accounts in a way to pay as little as possible.

There is a level which everyone has access to which is acceptable such as pension contributions and ISAs etc but I'd close every single other loophole and I'd ban contracting for any job that is even vaguely similar to another job in a company so no IT contractors, no consultants, no project managers etc. they are a temporary PAYE employee and should be paid as such (including sick, leave and pensions).

Wev1 said:
The charging higher rates to enable paying the extra tax doesn't work, all that means is the first guy to put up his rates, is the first to go bankrupt as he gets no work. The guy that undercuts gets all the work but then he goes bust as he's charged too little and not factored in for the rainy day.
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This is only true in the status quo. Change the status quo so nobody is allowed to be a contractor and everyone is on equal terms then it is no longer true. Everyone else is fiddling the system isn't a good enough reason to allow the honest person to go bust. Also, nobody on £300+ per day is going bust. You can still take home that rate but pay a fair amount of tax. You aren't losing out. If you think you are then that's how every other member of society feels when they see contractors (and their clients) using loopholes to pay less tax than they should.
 
There is a major flaw in the argument about dividends as someone else pointed out, it is dependant on the business making a profit. We had two customers go into administration last year resulting in no profit, no dividend and a need to prop the company's cash-flow up from your own money. All for no gain including salary for a year. Employees don't have any of these risks.
Prior to the tax on dividends being introduced there was a minor advantage in being paid this way for small business owners. If you take into account that, when compared to being employed, small business owners are also responsible for bookkeeping, VAT, ensuring legal compliance, insurance, HR, recruiting, etc I am starting to feel like it really isn't worth the effort anymore from a financial perspective.
I feel that the likes of Jonathan Ross, Gary Lineker etc i.e. single person companies have forced rule changes and that this has made running a small business and actually employing people pretty unattractive.
 
RedAsABeetroot said:
There is a major flaw in the argument about dividends as someone else pointed out, it is dependant on the business making a profit. We had two customers go into administration last year resulting in no profit, no dividend and a need to prop the company's cash-flow up from your own money. All for no gain including salary for a year. Employees don't have any of these risks.
Prior to the tax on dividends being introduced there was a minor advantage in being paid this way for small business owners. If you take into account that, when compared to being employed, small business owners are also responsible for bookkeeping, VAT, ensuring legal compliance, insurance, HR, recruiting, etc I am starting to feel like it really isn't worth the effort anymore from a financial perspective.
I feel that the likes of Jonathan Ross, Gary Lineker etc i.e. single person companies have forced rule changes and that this has made running a small business and actually employing people pretty unattractive.
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I agree with you. My issue isn't with genuine businesses that employ people but the way contractors set themselves up as a business with a single employee in order to be able to pay tax on dividends instead of income. In that sort of business there is no risk to not making a profit because there are no costs. Any business with premises, vehicles, employees etc that has bills to pay is where dividends should be used because the income is uncertain but the costs are usually fixed. There's no fixed costs to an IT contractor or a consultant other than a laptop and a mobile phone which they would have probably own whether they were employed or not.
 
boromike85 said:
Also, you don't lose any benefits by being a contractor.
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You didn't have a lot of credibility talking about contracting and IR35 from your previous posts - well, you had none actually, simply repeating the ill informed and ignorant view of how contracting works - but by making this statement you have now lost the right to be taken seriously at all.
 
Malaguena said:
You didn't have a lot of credibility talking about contracting and IR35 from your previous posts - well, you had none actually, simply repeating the ill informed and ignorant view of how contracting works - but by making this statement you have now lost the right to be taken seriously at all.
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Go on then, tell me what you don't receive and/or who should be providing those things?

You're either an employee and you're entitled to benefits or your Ltd company receives a fee from which it is entitled to pay sick, leave, pension etc for its employees (which is just you). The fact that you don't receive those benefits is due to your employer (which is you again) choosing not to provide them and you are will within your right to report them.

As an accountant I understand the whole setup. In my experience, most contractors don't understand it and just know the bits they can get away with. That's why they usually pay accountants to do it for them. They'll defend it because it works for them but morally there is no argument to be made. It is 100% factual that a "client" paying for the services of a contractor results in less tax going into the public purse than an employee costing the "client" an identical outlay does.

This is perfectly legal and all above board but that doesn't make it right. Just like trust funds, offshore accounts and businesses declaring their profits in low tax jurisdictions are equally legal.
 
What did he get wrong? If a PAYE has to say drive 60 miles round trip to a place of work he gets no allowance . A contractor places their home as place of work and can claim any cost.

His synopsis was not far out
 
Introduce a tax on intra group service charges

Want to offshore Profits via service charges levied by a group entity operating in Luxembourg? Yes you can, that’ll be 25% please.
 
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