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To the self employed - are you worried?

Apollo

Active Member
So pretty much as expected then. Help for some, although not for probably 3 months. Not much or nothing for others. Leaves some still well in the lurch financially.

Nice of him to prime us for a kicking after this is over. I presume this will be resurecting the NI ‘levelling up’ that Hammond failed to enact? I suppose that will mean the self employed getting access to the same benefits, holiday and pension as the employed then, yea right!

Without wanting to pick arguments, there seems to be some, who through basic ignorance or some twisted chip on the shoulder regarding the self employed are not getting (or really don’t care) about the problems many are facing here.

If you are suffering a collapse in trade and yet still lumbered with fixed costs regardless of turnover, then all this does is possibly either replace/contribute towards money to live or fixed costs, not both. Plenty will still unfortunately be hundreds/thousands a month in the red.

There is sadly going to be innumerable business failures, destroyed savings/retirements and all round pain to come out of this. A little empathy and humility would be appreciated :thumbsup:
 

Rasczak

Suspended
There is sadly going to be innumerable business failures, destroyed savings/retirements and all round pain to come out of this. A little empathy and humility would be appreciated :thumbsup:
You make it sound like that is going to be limited to the self employed. The vast, vast costs caused by this is going to shape our society for years to come. High taxation, reduced public spending, cutbacks to the services we get, reduction in the size of the uniformed services etc. The more we spend now, the worse that pain will be in due course.
 

Desmo

Member
Without wanting to pick arguments, there seems to be some, who through basic ignorance or some twisted chip on the shoulder regarding the self employed are not getting (or really don’t care) about the problems many are facing here.

If you are suffering a collapse in trade and yet still lumbered with fixed costs regardless of turnover, then all this does is possibly either replace/contribute towards money to live or fixed costs, not both. Plenty will still unfortunately be hundreds/thousands a month in the red.
The twisted chip on the shoulder is there because people want to avoid paying in to the pot but then come begging to take from the pot when it suits them. If anybody who is self-employed has been declaring their earnings properly then they have nothing to panic over, but those who didn't (and I bet we all know somebody who didn't) can't have much to complain about.

Then there's people like me, running a small business as a limited company. I declare everything I should and pay all my taxes and get zero financial help on a personal level.
 
The twisted chip on the shoulder is there because people want to avoid paying in to the pot but then come begging to take from the pot when it suits them. If anybody who is self-employed has been declaring their earnings properly then they have nothing to panic over, but those who didn't (and I bet we all know somebody who didn't) can't have much to complain about.

Then there's people like me, running a small business as a limited company. I declare everything I should and pay all my taxes and get zero financial help on a personal level.
Aren’t you an employee as well? So surely the same rules apply if the company requires assistance.
 

steve sph

Well-known Member
So apparently it's been decided by the AV Brains Trust that all self-employed mechanics are tax-fiddling, false-earnings-declaring, Merc-driving drug dealers?
This place gets more surreal by the day.
 
So apparently it's been decided by the AV Brains Trust that all self-employed mechanics are tax-fiddling, false-earnings-declaring, Merc-driving drug dealers?
This place gets more surreal by the day.
To be fair, that is not how I read those comments. Those seem to be clearly directed towards those who ordinarily pay themselves the legally lowest amount possible, thus significantly having reduced their contributions, yet now want to get the maximum assistance and benefits.

To me that doesn't seem reasonable.

And in addition it should also be recognised that there are several who do recognise that scenario and take it in their stride.

Saying that I do think it is a fair point being made that if some of those receive the least assistance now, that when the bill drops for all of this then also don't come knocking on the door. I do have some sympathy as their do seem to be multiple standards being employed.

That is why I always think that handing out money is a really bad idea. Especially in a situation like this. Just provide what people actually need. Prevent starvation, evictions and repossessions and reduce outgoings. That will go a long way to help everyone. Handing out money is not going to do that.
 

stiv674

Well-known Member
It's a bit like employed workers getting paid the same (for the same job) when some obviously do the bare minimum, or even less.

Let's not pretend that it's only the self employed who abuse the system.
 

Ruperts slippers

Distinguished Member
Capital expenditures are there to help the business survive. For example a Plumber may invest in a new vehicle, this can be used as an asset for for the business and be allowed to reduce tax liabilities. These benefits are in place to allow the business to flourish which usually takes upto 3 yrs to establish roots enough to bring in a regular income. Very rare does a business appear and then begin making a profit within the first 12 months of trading.


Another point is the law of diminishing returns doesn't apply to sole traders or small businesses, because the inefficiency would destroy the business. Most Paye business are affected by the LOD, which means in practice that 30% of employees do more work than the 70%. However despite this the majority of PAYE employees are being covered by the government.

I could go on but the man in the pub has neither the IQ or the understanding of how much it actually costs to employ them, they have very little understanding of economics, tax laws, or the management of a business from inception to day to day running. Another point is most money in low, mid income earner ends up back in the economy anyway, money flows from one party to another back to the government in other forms of tax.
Large percentage of earners are actually net benefactors of the tax regime in this country and are in fact contributing very little in fiscal terms as they receive more than they put in. So the term it's our money is actually a fallacy.

I wont receive support being a new business, however overheads are tiny and the girlfriend has a job she atm can work from home. If needs most I'll apply for an interim job.


Milton friedman was right when he said people look out for there own self interests, shown in the ridiculous hoarding, the bitter sniping at fellow citizens, the selfish the government rules don't apply to me attitude.
 

Apollo

Active Member
You make it sound like that is going to be limited to the self employed. The vast, vast costs caused by this is going to shape our society for years to come. High taxation, reduced public spending, cutbacks to the services we get, reduction in the size of the uniformed services etc. The more we spend now, the worse that pain will be in due course.
I don't think I made it sound like anything such, maybe you are just imprinting your prejudices onto my observation?

"destroyed savings/retirements and all round pain to come out of this" applies just as much to many on PAYE, the retired and everybody else to a greater or lesser degree I expect.
 

Apollo

Active Member
The twisted chip on the shoulder is there because people want to avoid paying in to the pot but then come begging to take from the pot when it suits them.
Nobody is arguing that there aren't, and haven't always been, self employed who break the rules. This however also applies to people in all walks of life.

Plenty of PAYE who trade a bit on the side who should be declaring....ebay, car boots, driveway motor sales etc.

Then there are the "unemployed" claiming and working cash in hand, often for the same dodgy traders that are being rightly castigated here.

If anybody who is self-employed has been declaring their earnings properly then they have nothing to panic over
Seriously?
You run a small business and actually believe this?
 

Dancook

Distinguished Member
So if after expenses my profit for the year is £15,000 - but then I have spent £10,000 on equipment and marked it off as capital allowance.

Will the Government calculate my profits at £15k or £5k?

should be the former right.. because my profits are £5k + £10k of equipment.. so £15k profit... surely
 

joust

Active Member
I'm a single man Ltd company, and have been for some years. Yes, I'm worried, and no, I won't get any help from the government, as I pay myself limited PAYE but the rest in dividends - under the guidance this wouldn't be covered for any payments.

I hear the cries of foul now - however, I pay my fair share in taxes, its just not called PAYE/NI, its called corporation tax, NI, PAYE and dividend tax, and it totals not that far short of an equivalent PAYE job. I don't get the cushy support my peers where I work get, paid holidays, generous sick pay, pay rises (in fact I've lost pay over the last 7 years), pensions paid for, training, discounts etc etc etc. I'm also very vulnerable to this type of scenario, I can be laid off at a moments notice - no redundancy payments here. So spare a thought that we aren't all dodgy - my accounts are straight up/straight down, nothing untoward.

Do I think its fair I won't get the same support should my current assignment get pulled - no, I pay in too, just like everyone else, so why shouldn't I get similar support? And after this crisis, I will continue to pay in too......

Joust
 

Desmo

Member
Seriously?
You run a small business and actually believe this?
I meant within reason. They're going to get 80% of their profits covered. Better than nothing.
 

Desmo

Member
Aren’t you an employee as well? So surely the same rules apply if the company requires assistance.
My earnings through PAYE are around £720 a month, the rest is dividends. So minimal help on the 80%.
 

Ruperts slippers

Distinguished Member
Personally i feel that theses financial aid programs have missed the mark. Suspension of liabilities for three months would've worked better, all that's happened is the governments have overloaded there own administration system.
Maybe agree to £500-1000 3 monthly payments to every NI number which would cover every citizen.
 

jfinnie

Distinguished Member
Agreed, 80% is minimal help. Naturally you, and many others had a choice when setting the salary level...
Sometimes it's not practical to set a higher salary level. A new company starting out doesn't have much money in the bank. And in normal running the income from customers can be lumpy - sometimes being used as a bank to cover their own cashflow requirements and not having much income at all one month and then 3 months income in one month the next.

It isn't as black and white as just setting a high salary level.

Anyway, as it is I'm not going to be complaining over the arrangements for now, as if I can get the small business rates relief sum it should cover (I hope) the shortfall I will have; it seems I've possibly been lucky in having an office / lab that attracted SBRR.
 

Desmo

Member
...
 

69COU

Active Member
REAL WORLD

You set up a business as some large company throws you on the scrap heap at 40 in the financial crisis 10 years ago. You have a young family perhaps a part time spouse at the time.

First 5 years you are a sole trader ( Self Employed) everthing you do is revenue in less costs of getting that revenue to hopefully get to a gross profit. Some months you have more costs such as advertising, shows etc, then other months when you have sales of service you do this. Thus no month to month set profit to then say you can pay yourself. What do you do in lean months you lend your own money / savings to your trade and hope to get in back again the next. Eventually the trade starts to make some money having built up some customers/reputation etc.

You pay tax and NI on what you actually make as a Net profit. This is fair a PAYE employee for example that uses their own car for business purposes can claim cost back. The same basic rules apply to self employed.

It does not end there. This is what the chancellor classed as the 95% he actually should have said sole traders who are self employed for tax purposes.


Sole Traders who is not self employed ( most once the maths says gross profits are the same as the average gross employee salary. )


Next your accountant says do you realise anything you do work wise that could go wrong, means you carry an unlimited liability . This means anything you own or for that matter your spouse owns is at risk. They did not realise this your family home is at risk if through a supplier you were given a dodgy part or a service went wrong. Yes insurance may mitigate but does not take away completely. An employee has protection his employer carries this risk.

The penny drops which says everything even your spouse may have worked for you may by accident put at risk, your children’s future etc.

So you accountant says to incorporate as a Limited Company. Not much has changed you will still have same ups and downs of income and expenses but this time you lend your company your own money/savings ( read as families money) to get it up and running and develop. Nothing has changed, what level do you set your salary at. Well that depends.

For a few years you may say Zero as cannot pay yourself if money is not there? Not on a month by month basis anyhow, you do own the company so if it makes a profit so more income than expenses then it has a gross profit for example if it was £20,000 gross profit it pays corporation tax 19% so in this case £3800 corporation tax. This leaves £16200 net profit which it could pay as a dividend to its owner ( shareholder) the £16200 is now subject to normal income tax by the individual.
A couple of years in you realise that your within you build up stage you don’t qualify for any state pension for these years unless you pay yourself a minimum PAYE .

Your accountant who you also pay, will say pay yourself the minimum you can which is sustainable and if a min of approx £8600 per year at lease you won’t forgo entitlement to your basic state pension. Why as although this is now deducted from gross profit so not 19% corporation tax it is subject to employee and employer NI. ( 13.8%) note that is lower than the corporation tax. If you had the luxury you would pay yourself more in salary than dividends.

However a company can only pay a salary PAYE if actually made the money. E.g for those who want it simple it would be lovely to Award yourself PAYE salary of £3000 per month but if the company has not got the money earned it cannot pay it. Remember gross profit in example was only £20,000 for year. As a director/owner you have no protections such as minimum wage.

You are effectively still self employed however are one step behind in the queue to the trough to feed E.g Behind the corporation tax.


In this example though if it was sustainable and you have yourself that salary of £8600
gross profit is £20,000 minus the £8600 Salary paid. (£8600 received by you now as employee gross before tax and NI applied.) allow for 13.8% NI (1186 )

That leaves company with a lower gross profit of £12,400 that company pays corporation tax at 19% ( £2356 tax here) this leaves £10044 that could now be paid as a dividend to owner. ( I will leave the cost of the NI bill out of things for simplicity. )

If the £10044 paid to owner which has already had 19%tax deducted this is added to their other £8600 PAYE for tax purposes. They get a small allowance now that the first £2000 of dividends is not taxed again the balance is subject to a 7% additional tax charge.


The reason is the government wanted to level up between PAYE and business owners re NI however gave every member of the population the same £2000 dividend allowance so if they own shares through savings they get the same.

Perhaps advantage is in the wider PAYE population?

Hopefully explanation of the difference in what government see a Self Employed worker as is now clear. Perhaps they will could read this and understand the next step.

The sole trader via a limited company. (Is still effectively self employed ) These are forgotten as It is too convenient to say they only pay themselves a low salary as some phantom advantage. It’s actually about cash flow.

In addition to get work from any government , council or quango you need to tender as a Ltd Company as the governments did not want any liability for the individual that could be classed as an employee for rights and benefits.

How do I know I applied for a role in a government agency a few years ago, I could notbe self employed sole trader, would only give me the job if I set up a Limited Company. This was not to save me money it was so that they did not become liable for me as a worker! No rights!


To demonstrate this further assuming that one man business now takes on its first employee aside from the owner. Let assume it has managed to get a contract to cut the grass for a council office or similar.

Order of payment from gross profits.
1) New employee first with all rights min wage etc protections
2) If owner still can afford it basic wage, no min wage or other protections
3) If it makes a profit above possible some dividends. Subject to a minimum 19% corporate tax first then the 7% individual tax.

If the business owners was themselves receiving a combination of salary/dividends and it takes them into a higher rate tax bracket the same as anyone else guess what they pay additional tax on both the dividend.

Conclusion a normal employee works say traditional 9-5 and does not worry where his employer gets the money to pay them. However behind the scenes all the same is going on in private sector as above.

If you are the owner manager or trade owner Self employed by the Government definition or a Ltd company you work any hour available, live , sleep your business and worry behind the scenes where the next bit of cash is coming into the business.

If you are a public sector employee same apply however taxation provides the income to be paid. It is circulatory you spend your money and goods and services, some in the private sector so merry go round continues.

The vast majority would have a paternal/maternal view and as above by puting paying their own staff before themselves. The reason most do is they have gone it to the situation normally by external circumstances and often particularly in the case of married couples managed to get through the early years by beg, borrowing and sharing costs of partner who may well have been a traditional PAYE employee elsewhere.

If the Business grows they may give something back to family members who helped them get off the ground by way of shares or even a job. Hence the traditional family business that the country grew up upon in the past.

So before calling everyone a crook and non deserving perhaps think back to them signs you used to see above a traditional shop such as J Smith & sons Ltd. People may realise this more in the coming months as biggest remaining traditional family businesses are things life the undertakers and funeral homes. Perhaps those doing the the jobs those of us fortunate enough to not want to do and have been happy to turn a blind eye to.

The vast majority of population were happy to turn a blind eye to the lack of pay rises for Nurses and doctors for the last 10 years all of a sudden reality has woken society to who our real key workers are!
 
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Rockets

Active Member
So if after expenses my profit for the year is £15,000 - but then I have spent £10,000 on equipment and marked it off as capital allowance.

Will the Government calculate my profits at £15k or £5k?

should be the former right.. because my profits are £5k + £10k of equipment.. so £15k profit... surely
No.

Assuming it was calculated into your tax return.
You will get a tax break from that equipment purchased.

So in very simple terms forgetting about the business exactly what was your net salary you used personally = £5000

The £10000 was and is part of the business which should be noted you got tax breaks for that anyway. It is a asset of the business. Indeed you will find that the law is if you decide to then sell that equipment you will have to add it in your accounts calculations.

Edit - worth noting if you were ever audited and they found that you sold equipment which was for the company without declaring it in your yearly accounts strictly speaking it is tax fraud.
 

Dancook

Distinguished Member
No.

Assuming it was calculated into your tax return.
You will get a tax break from that equipment purchased.

So in very simple terms forgetting about the business exactly what was your net salary you used personally = £5000

The £10000 was and is part of the business which should be noted you got tax breaks for that anyway. It is a asset of the business. Indeed you will find that the law is if you decide to then sell that equipment you will have to add it in your accounts calculations.

Edit - worth noting if you were ever audited and they found that you sold equipment which was for the company without declaring it in your yearly accounts strictly speaking it is tax fraud.
If I sell anything I add it back in as earnings, no worries!

I spent about £13,000 on a camera and two lenses and built a new PC this last year - calculated on profits will be decimated then!
 
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Rockets

Active Member
If I sell anything I add it back in as earnings, no worries!

I spent about £13,000 on a camera and two lenses and built a new PC this last year - calculated on profits will be decimated then!
Absolutely but don't forget you will get tax relief on this. So say you get taxed at 20% you wouldn't now pay £2600 tax on earnings.

The regular man on the street (not the super wealthy self employed) the worse part of it is it will be taken into account when applying for a mortgage/remortgage. Even though you were able to save the money and invest it at your own effort.

Where as if you took a business loan over many years which is far more risky for you and the HMRC you would appear to have far bigger income and get a bigger mortgage but in reality a far bigger risk to banks!!

Certain things are very screwed up.
 

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