Effective Personal Tax Rates
Whether you are an employee, sole trader or shareholding company director your effective personal tax rates can be very different.
HMRC are under pressure to raise extra taxes to repay the rises in the National Debt after the huge support given to the economy through the Covid-19 crisis. Taxation is raised from many areas of the economy with personal taxation being one of the core areas.
One of our key roles is to advise clients on how they can maximise their personal wealth in the short and long term. The linked article from the ICAEW shows how the choice of legal status and /or method of payment of drawings to an individual from a business can make a significant difference to your effective personal tax rates.
Successive chancellors have met numerous problems in trying to increase taxation on the self employed. And the question remains of how much the taxation system should be used to support and encourage entrepreneurs. The present arrangements are often held up as being too generous by some critics. But these arguments can fail to highlight the lack of support that is provided by the state in the form of benefits, when things go wrong either through sickness or unemployment.
Support provided to people in business through the furlough scheme and SEISS payments were not available to those that run their own one man limited companies. The problem also affected those who had recently become self employed. So although the self employed would pay less tax in most years on an annual basis, some have been left with businesses that were forced to close and received no support at all. This contrasts starkly with some employees who have effectively had a 12 month government paid holiday!
Call Brian Russell on 01661 872004 to discuss tax planning strategies.