Contractors Limited Company Dividends
The Chancellor announced that he is slashing contractors Limited Company Dividends allowance.
He said that there is too big a gap between the tax and national insurance ordinary taxpayers pay and those who are in self employment.
He said that there is an even bigger gap between the tax and NI ordinary taxpayers pay and those who incorporate.
The Chancellor said that he would narrow that gap.
He claimed that it was unfair and that everyone should contribute. He said that they use the same public facilities and so should make the same contributions.
Tackling Tax Avoidance
According to the Chancellor, HMRC has raised £140bn since 2010 by tackling tax avoidance.
He said that from June, if a court finds in favour of HMRC against a contractor who uses a scheme to save tax, the providers of that scheme will be hit by penalties.
Tax Considerations Should not Drive Choice
He said that whether people choose to have a permanent job, be self employed or operate through a limited company should not be driven by tax considerations.
He said that a permanent member of staff who earned £32,000 a year would pay £6,170 in National Insurance contributions compared to a self employed person who would pay £2,300. The Chancellor said that this is not fair and he wants close the gap.
From April 2018, the Chancellor will raise Class 4 National Insurance payments for self employed people from 9% to 11%.
That would raise £145 a year by 2021/22.
Contractors Dividends Slashed
He said that lower national insurance payments from the self employed cost over £5n this year alone.
The Chancellor said that this was “not fair to the 85% of workers who are employees”.
So, the tax free dividend allowance will drop from £5,000 a year to £2,000 a year from April 2018.
It looks like the Chancellor has joined a long line of Chancellors, of both political persuasions, to bash contractors.
This time it is contractors Limited Company dividends.
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