"Five Giants" on the road to reconstruction

Katie59

There are all sorts of allowances given by government to encourage businesses and investors anyone who takes a risk rather than just taking the wages, dividends are one of many.
The concession on £2500 is worth around £300 which won’t cover the extra accountancy costs for companies.

All of us that declare tax legally wether personal or company take advantage of dozens of allowances that the government has decided they want to give to encourage enterprise. You conveniently ignore the allowances that make up your PAYE code

I really do not know what you are trying to say here, Katie59

You asked about how unearned income was taxed differently. Income from share dividends, shares owned by people who have no connection whatsoever with the business, is unearned income. You get an additional allowance of £2000, on top of your personal allowance, on income from dividends and the income is taxed at 7.5% if you're a basic rate payer and 32% if you pay higher rate.

This has nothing to do with company taxation. Dinahmo was only mentioning it in connection with dividend taken as personal income by a company owner as being more tax effective. Nothing to do with company income.

There are all sorts of allowances given by government to encourage businesses and investors anyone who takes a risk rather than just taking the wages, dividends are one of many.
The concession on £2500 is worth around £300 which won’t cover the extra accountancy costs for companies.

All of us that declare tax legally wether personal or company take advantage of dozens of allowances that the government has decided they want to give to encourage enterprise. You conveniently ignore the allowances that make up your PAYE code

Katie59

Personal taxation is the same rate regardless wether it is earned or unearned and peaks at 45% and no personal allowance according to your income.
There are many many tax incentives and expenses for the maintenance of property are allowed as are depreciation and running costs of machinery.
We all get tax concessions, inheritance tax thresholds and no CGT on private homes, rental properties do pay CGT.

Company Tax has been abused by celebrities to pay less tax and should be stopped. For normal trading companies cash can be kept in the company but directors are subject to PAYE, the downside is that when shares are sold they are taxed.

Why are you ignoring the extra £2,500 dividend allowance and the 7.5% rate at which tax is paid on dividends? As detailed on the UK govt web page I linked to and by Dinahmo.

Or don't you count company dividend as 'income'? Is it just a little present from Father Christmas?

“Making the Rich, Richer and the Poor, Poorer”

It’s often said “ it’s easier after your first million “

Actually it’s easier if you earn more than it costs you to live.
You can either use your spare cash to improve your lifestyle, more holidays, bigger house etc, spending your income from month to month. Or you can invest your spare cash to increase your income, self employed often do this to expanding the business, a skilled couple with an economical lifestyle can increase their wealth quickly.

Personal taxation is the same rate regardless wether it is earned or unearned and peaks at 45% and no personal allowance according to your income.
There are many many tax incentives and expenses for the maintenance of property are allowed as are depreciation and running costs of machinery.
We all get tax concessions, inheritance tax thresholds and no CGT on private homes, rental properties do pay CGT.

Company Tax has been abused by celebrities to pay less tax and should be stopped. For normal trading companies cash can be kept in the company but directors are subject to PAYE, the downside is that when shares are sold they are taxed.

Tax on dividends. Very simplified.

In the beginning there was a tax credit attached to dividends which meant that someone whose income was less than the personal allowance and included some dividend income would be able to claim back the tax suffered on dividends up to the level of their personal allowance. The system then was complicated because of the way in which limited companies had to pay over advance corporation tax every quarter on dividends paid.

I forget when this system stopped and it was changed to pretty much what we have today. Companies pay corporation tax on their profits and dividends are paid out of the taxed income.

This was a godsend for people with companies. They paid themselves a salary that was sufficient to pay some NIC and to take the rest in dividends. Both I and my OH, being both self employed, set up companies at that time to benefit from this regime. As did many self employed people. Instead of paying 20% tax on profits plus around 9% Class 4 NIC, above a threshold less than the PA, you paid 19% Corporation tax and a very small amount of NIC. The trick was to pay a salary of a little over the PA.

This resulted in a loss of tax to the Treasury and for 2016/17 onwards, this was knocked on the head. The govt then said that dividends up to £5000 would not suffer additional tax unless the individual was a higher rate tax payer. Any dividends received in excess of £5000 would suffer 7.5% tax for a basic rate tax payer. Higher rate tax payers would pay more. This lasted for 2 years.

Currently the dividend allowance is £2500 and the tax charged is at 7.5% for a basic rate tax payer and 32.5% for higher rate taxpayers.

I'm not a tax accountant Katie59 but they seem to earn good money and there are enough of them around to think this is a growing industry. There are many tax allowances available, so much so that our tax code of 11,520 pages is unlikely to be one any of us can quote from. Its length makes it complex to the average person who is, therefore, less likely to gain from it.

Why should complex tax relief apply to those who are already over averagely wealthy? One example you might like to read is Tax Relief on Woodlands: How to maximise your forestry tax breaks.

A simplification of the tax system would show the real aim to bring about more equality rather than the aim this government seems to have of making the rich richer and the poor poorer.

So, back to the OP. What are the agreed cross-party challenges you think any government should be tackling?

In what way is unearned income taxed differently to earned income?

There is an additional allowance of £2,000 for dividend income, over and above the personal tax allowance, and it is taxed at a much lower rate of 7.5% for basic rate taxpayers.

I have been told (by a bloke on twitter, ) that this low rate is to compensate for the the fact that a company has already paid corporation tax on the profits that are being distributed as dividend. I'm not sure how true that is.

Here is the government site which explains taxation of dividends:

www.gov.uk/tax-on-dividends

PippaZ

Or at least pay the same tax on "unearned" income as people pay on earned income growstuff. I really think - going back to the challenges - that taxation is one of our biggest ones.

The problems with inequality need to start with tax. I can't see any other way, personally. It will take a brave government though.

In what way is unearned income taxed differently to earned income?.

I don't think they were meant to be in any particular order Hetty58, but maybe they should be. There will be a lot of different opinions on what goes where though, I would think.

People, not politicians, must lead the way in bringing our democracy into the 21st century.

unlockdemocracy.org.uk/

I don't like 'Combating Climate Change being tacked on the end (like an afterthought) when it should be our number one top priority. After all, the rest are pointless without it!

Surely, we've now had a wake up call and realise that drastic changes are needed?

Or at least pay the same tax on "unearned" income as people pay on earned income growstuff. I really think - going back to the challenges - that taxation is one of our biggest ones.

The problems with inequality need to start with tax. I can't see any other way, personally. It will take a brave government though.

Yes varian it would.

It would also be better to have an economy in which people could earn more from work than they can from owning property or other assets.

Why should you need to become a manager to be successful?

In so many jobs - not just engineering, but in many other professions when someone has gained experience and become really good at what they trained to do, they can only earn more by becoming managers and doing something they may not have been trained to do, may not be much good at and may not enjoy.

Wouldn't it be better to reward those who are good at what they trained to do?

you know the answer to that, it is completely backwards. If we hadn't had a child with a disability we would have moved abroad and I suspect my engineering son will do at some point

JaneJudge

My husband would say too many engineering graduates don't want to do engineering, they want to be managers. He has been inundated with work during covid (thankfully) because there is a skill gap of people who can do the technical applications in his field

Who gets paid more - the managers or the technical engineers?

I mean thankfully for us

My husband would say too many engineering graduates don't want to do engineering, they want to be managers. He has been inundated with work during covid (thankfully) because there is a skill gap of people who can do the technical applications in his field

I agree varian. Every authoritarian regime does the same. Education is not valued and even treated with derision.

PippaZ

I was typing my post Tue 16-Mar-21 10:13:52 while you were writing yours growstuff. Very interesting third paragraph.

One of my tutees is from China. She was educated in China until the age of 12 and has now been in the UK for three years. Her ability in maths and to rote learn is phenomenal. I have honestly never come across any other pupils like her, especially as English is her second language. I've been tutoring her for three years - in German (mainly), English and history. At first, she found being asked to formulate and justify her own opinions completely alien. In history, I had to train her to look at evidence and how to use it. I fear it's that level of education which will be lost if the current "culture war" against elites continues.

In November 2015 Jonathan Portes of the National Institute of Economic and Social Resaerch examined some claims made by Leave campaigner Daniel Hannan in a paper entitled "After Brexit: how important would UK trade be to the EU?"-

"But, although it is clear that the UK is indeed a major trading partner for the rest of the EU, statistics on precisely how large are hard to come by. So my eye was caught by a claim by Dan Hannan MEP:-

"We run a massive trade deficit with the EU (but a surplus with the rest of the world). On the day we left, we’d become the EU’s single biggest market, accounting for 21 per cent of its exports – more than its second and third largest markets (the US and Japan) combined."

Now, to say that Mr Hannan’s statistics should be taken with a grain of salt is an understatement. While both sides in the referendum campaign use statistics "as a drunk uses a lamppost" (for support, rather than illumination), Mr Hannan has a habit of simply inventing them. Not only does he not check them, but, considerably worse, he doesn’t correct his errors, even after they’ve been pointed out, as Hugo Dixon explains here (Hannan has apparently accepted that his claims are false, but still not taken down or amended his video). "

www.niesr.ac.uk/blog/after-brexit-how-important-would-uk-trade-be-eu

The pro-brexit press were only too keen to print the lies and very few of their readers would ever check the facts. (remember this came from the same Daniel Hannan who said "no-one is talking about leaving the single market" - and some people believed that too).

We not only need accurate statistics clearly presented, but a press which will publish them and a population which understands what they mean.

Oh well! At least you recognised the misunderstanding. I don't think there's much wrong with that.

I was typing my post Tue 16-Mar-21 10:13:52 while you were writing yours growstuff. Very interesting third paragraph.

I would also include improving the level of reading comprehension ...

As I managed to completely misunderstand Varian's post I'm not sure about my own