Self employed

[Pocster]

  On 31/03/2020 at 06:43, PeterW said:

Years ago (when VAT was 15%...) BDO did a paper on the 20/20/20 policy for taxation. It removed all personal taxes and charges such as NI and replaced it with a single flat rate 20% income tax from £0 with no limits. Likewise VAT and Corporation Tax pinned at 20% from zero upward.  
 

They calculated the country would be in the same position however the layoffs in HMRC and accountancy firms would be over 1m people ... 

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I remember reading something similar ages ago . It’s conclusion was the same the unemployed HMRC and accountants was the issue !

[Ferdinand]

  On 30/03/2020 at 19:54, AliG said:

An employed person earning £40,000 per year pays £3,764 in NI and £5498 in tax. Their employer pays £4,561 in NI.

 

A self employed person would pay the same amount of income tax, except they could probably get some deductions not available to an employed person. Their NI bill (Class 2 and Class 4) would be £2984.

 

So the total tax and NI on a self employed person making £40000 a year is £8482 versus £13823 for an employed person. In reality the self employed person would effectively be paid the employer's NICs and then pay some tax on them.

 

What do you get for your extra £5000+ a year -

1. The average UK person is off sick for 4 days a year - Let's call it a week £92 of SSP.

2. JSA - £73.10 a week if you have savings of less than £6,000. So for many people, nothing.

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I don't think that is a comprehensive comparison as many employee benefits are tax subsidised at corporate level - eg employer pension contributions and all the rest. The last employer I worked for ended up paying a further 40% of salary into the pension scheme - that is a part employer subsidy and a part tax subsidy.

 

The one before that I had a sports ground, gym, ESOP, AVCs and all manner of things in the package.

 

In Transport for London you get free travel for 2 people in the London Region that would cost £4-5k per year for anyone else, Private Health Insurance free or subsidised, final salary pension, Health Cashplan for I think £1 a week, and smaller stuff like bike subsidy.

 

F

[Ferdinand]

  On 31/03/2020 at 09:12, RandAbuild said:

  On 31/03/2020 at 08:47, Ferdinand said:

 

The nob was Yvette Cooper. She has a lot of consequent misery and homelessness to answer for.

 

If you want t argue that that is living off state benefits then you have to apply the same standard to everything else bought with benefits - eg Sainsburys because they take the money for food, DVLA for Road Tax etc.

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I think you'll find it was the Coalition Government in 2010 that introduced Housing Benefit payment direct to tenants rather than to their landlord.

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I  think I am correct on this point, though it is possible I am doing Yvette Cooper a disservice (and I have softened my first posting) - would need to trace the ministerial responsibilities for this particular change in 2007-2009.

 

The  presumption that payment would only be made direct to the LL in exceptional circumstances (eg arrears of 8 weeks) came in with the Welfare Reform Act 2007 when Housing Benefit was changed with the introduction of the Local Housing Allowance. No idea if that applied outside England. 

 

https://en.wikipedia.org/wiki/Local_Housing_Allowance#Operation_of_Local_Housing_Allowance

 

"Unlike the previous schemes, the claimant is normally unable to request that payments of benefits are made to their landlord, although they may be made to a third party. Exceptions may be made where the tenant has a history of not paying rent or is not sufficiently able to handle their affairs. Decisions on this are subject to a council operated safeguarding policy which may be requested from the local authority.

 

In all cases a landlord must be paid the rent (without any excess) if the tenant is more than 8 weeks in arrears. This will continue until the arrears are below 8 weeks."

 

Caused havoc in some places. Some Ts went on a spree with the rent money then found themselves unable to recover.

 

The same Act introduced the concept of payment according to required number of bedrooms in benefits payments in the  PRS, but no one campaigned vociferously about it afaics until the concept came into the Social Sector, when it was dubbed the 'bedroom tax' - as we all know.

 

Hope that helps.

 

Ferdinand

Edited March 31, 2020 by Ferdinand

[RandAbuild]

  On 31/03/2020 at 09:44, Ferdinand said:

 

I  think I am correct on this point, though it is possible I am doing Yvette Cooper a disservice (and I have softened my first posting) - would need to trace the ministerial responsibilities for this particular change in 2007-2009.

 

The  presumption that payment would only be made direct to the LL in exceptional circumstances (eg arrears of 8 weeks) came in with the Welfare Reform Act 2007 when Housing Benefit was changed with the introduction of the Local Housing Allowance. No idea if that applied outside England. 

 

https://en.wikipedia.org/wiki/Local_Housing_Allowance#Operation_of_Local_Housing_Allowance

 

"Unlike the previous schemes, the claimant is normally unable to request that payments of benefits are made to their landlord, although they may be made to a third party. Exceptions may be made where the tenant has a history of not paying rent or is not sufficiently able to handle their affairs. Decisions on this are subject to a council operated safeguarding policy which may be requested from the local authority.

 

In all cases a landlord must be paid the rent (without any excess) if the tenant is more than 8 weeks in arrears. This will continue until the arrears are below 8 weeks."

 

Caused havoc in some places. Some Ts went on a spree with the rent money then found themselves unable to recover.

 

The same Act introduced the concept of payment according to required number of bedrooms in benefits payments in the  PRS, but no one campaigned vociferously about it afaics until the concept came into the Social Sector, when it was dubbed the 'bedroom tax' - as we all know.

 

Hope that helps.

 

Ferdinand

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I stand corrected Ferdinand, although introduction to make payments direct to tenants was phased in between the 2007 pilots and 2013 when Universal Credit came in.

 

You are correct too that it created havoc - arrears went through the roof in many areas.

[Ferdinand]

  On 31/03/2020 at 10:03, RandAbuild said:

 

I stand corrected Ferdinand, although introduction to make payments direct to tenants was phased in between the 2007 pilots and 2013 when Universal Credit came in.

 

You are correct too that it created havoc - arrears went through the roof in many areas.

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I started getting seriously interested in issues around rental law / politics when around then I had a T in my own rented-out house who was in work for unpredictable periods, and I would get clawbacks of random amounts of rent each month from the LA for a few £££, with the instruction to go back to the T and recover from them.

 

Before long there were ludicrous amounts of case law and professionals making their living out of the fine distinctions in the precise circumstances where such clawbacks were lawful or not,  or the LL was guilty of fraud in concert with the T if they knew, and who had which burden of proof etc.

 

Far too much buggeration for a system that would ever work sustainably.

 

Our Parliament should be like Texas:

"The Texas Legislature meets in regular session on the second Tuesday in January of each odd-numbered year. The Texas Constitution limits the regular session to 140 calendar days."

 

F

Edited March 31, 2020 by Ferdinand

[ProDave]

Private rental has changed a lot over the years.  When we bought our first 2 BTL's in 2003, you could then claim 100% of your mortgage interest as an expense and so offset the tax due.  It used to be standard practice then that most landlords would maximise the mortgage on their rental properties in order to minimise the mortgage on their own residence, as you get no tax relief on that one.

 

But there is a  flip side for people like us with no mortgage.  Our expenses are very small, mostly insurance, and a small amount of maintenance. So it does not amount to much.  But on the tax return there is a box for people like us to "tick here to claim a flat rate £1000 allowance instead of actual expenses"  which is more than our actual expenses usually adds up to, so of course we tick the box.

 

And since legally with a joint owned property each co owner declares half the rental income on their own tax return, which means we both have a "tick here for £1000" box,

[Pocster]

See the wank pot council have found something to do; sending out hmo approved license’s . Irrespective of CV19 “will inspect within 5 years “ - what a joke !

[joe90]

  On 31/03/2020 at 11:13, ProDave said:

But there is a  flip side for people like us with no mortgage.  Our expenses are very small, mostly insurance, and a small amount of maintenance. So it does not amount to much.  But on the tax return there is a box for people like us to "tick here to claim a flat rate £1000 allowance instead of actual expenses"  which is more than our actual expenses usually adds up to, so of course we tick the box.

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I sent my tax accountant this and he confirmed he automatically did this for us, he asked for my yearly expenses to make sure it was less than the £1000. ?

[JFDIY]

  On 31/03/2020 at 11:13, ProDave said:

Private rental has changed a lot over the years.  When we bought our first 2 BTL's in 2003, you could then claim 100% of your mortgage interest as an expense and so offset the tax due.  It used to be standard practice then that most landlords would maximise the mortgage on their rental properties in order to minimise the mortgage on their own residence, as you get no tax relief on that one.

 

But there is a  flip side for people like us with no mortgage.  Our expenses are very small, mostly insurance, and a small amount of maintenance. So it does not amount to much.  But on the tax return there is a box for people like us to "tick here to claim a flat rate £1000 allowance instead of actual expenses"  which is more than our actual expenses usually adds up to, so of course we tick the box.

 

And since legally with a joint owned property each co owner declares half the rental income on their own tax return, which means we both have a "tick here for £1000" box,

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Do you claim your expenses etc. Under the property section or as self employed? Can't recall ever seeing option for claiming £1k of expenses as a flat figure.

[Barney12]

  On 31/03/2020 at 21:33, JFDIY said:

 

Do you claim your expenses etc. Under the property section or as self employed? Can't recall ever seeing option for claiming £1k of expenses as a flat figure.

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https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

[Cpd]

  On 31/03/2020 at 01:08, andyscotland said:

Interestingly I vaguely recall seeing some research that small firms that made it clear any SSP comes out of the owner's pocket tend to see lower rates of sickness absence than elsewhere...

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When I ran my company in Australia I employed 6-8 people, sick pay over there is something employees see as an entitlement they need to use up before it goes out of date.....  having workers not turn up because they are using  “sick” days up when they are not sick in a bloody nightmare for a small company that relies on a set amount of people to make a functional team  of workers.... and if you add up 6 employees all taking there sick pay at random time’s this actually causes a huge financial burden / disruption  to a small company. To get round this I told all my employees that ALL outstanding sick days not taken would be paid out as full days wages With a   bonus at xmas each year. Suddenly nobody was sick, work was uninterrupted and everything was sweet. The lads were stoked at xmas as they would all get a sizeable sick pay payout plus bonus. 

[JFDIY]

  On 31/03/2020 at 21:36, Barney12 said:

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

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That would have saved me about £300 tax last year (18/19). I just put in my actuals, and last year was good with full rent and limited expenses.

 

This year 19/20 won't be as good, part empty and some refurb costs.

[ProDave]

  On 31/03/2020 at 21:33, JFDIY said:

 

Do you claim your expenses etc. Under the property section or as self employed? Can't recall ever seeing option for claiming £1k of expenses as a flat figure.

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For property income I claim the £1000 allowance as my actual expenses are usually lower.

 

For my SE earnings I claim actual expenses as they are more than £1000

 

All explained in the link that @Barney12 posted

 

Regarding the self employed help from the government, there is a useful summary here on MSE  https://www.moneysavingexpert.com/news/2020/03/coronavirus-self-employed-and-employment-help/?utm_source=MSE_Newsletter&utm_medium=email&utm_term=31-Mar-20-50599902-4311&utm_campaign=nt-hiya&utm_content=8#sesupport

 

Quick summary:

 

  Quote

• You must have filed a tax return for 2018/19. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018-9 tax return but missed the deadline this year, you'll have until 26 April to submit your tax return and then you can still access the scheme. However, if you only have a few months' self-employment on your 2018/19 return, this will be counted as your total profit for the year – the Government won't pro-rata it based on your monthly profits. 
   
• You must earn more than half your total income from self-employment. This must have been the case for either your 2018/19 tax return - or if not, the average of your 2016/17, 2017/18 and 2018/19 tax returns.
   
• Your average trading profit must be less than £50,000/year. This is essentially a 'cliff-edge' requirement – so those whose average annual trading profit is £50,000 or more won't be able to get any support from this scheme.
   
• This scheme's expected to start paying out in June. Payments will be likely backdated to cover March, April and May (in form of a lump sum). The scheme will operate across the UK and is set to last for at least three months, though this could be extended. 
   
• Unlike the employee scheme, here you CAN keep working. You also do not need to prove coronavirus impact - all who qualify get it.

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As it looks like they will take your average earnings over 3 years I think I am okay on the SE = >50% issue.

 

[Pocster]

  On 01/04/2020 at 09:07, ProDave said:

For property income I claim the £1000 allowance as my actual expenses are usually lower.

 

For my SE earnings I claim actual expenses as they are more than £1000

 

All explained in the link that @Barney12 posted

 

Regarding the self employed help from the government, there is a useful summary here on MSE  https://www.moneysavingexpert.com/news/2020/03/coronavirus-self-employed-and-employment-help/?utm_source=MSE_Newsletter&utm_medium=email&utm_term=31-Mar-20-50599902-4311&utm_campaign=nt-hiya&utm_content=8#sesupport

 

Quick summary:

 

 

 

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On that list a self employed LL would qualify . I guess depends on what else they check like NIC contribution.

[ProDave]

  On 01/04/2020 at 09:10, pocster said:

On that list a self employed LL would qualify . I guess depends on what else they check like NIC contribution.

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If they count my rental income as well as my actual SE income I could be in line for a bigger grant than I thought.

 

[Pocster]

  On 01/04/2020 at 09:14, ProDave said:

If they count my rental income as well as my actual SE income I could be in line for a bigger grant than I thought.

 

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Good . The policy should help everyone ! I’m still not expecting anything .

[ProDave]

But I still don't see any words that make me think rental income is going to be treated as "self employment" If you are reading that into something please show me what.

[Pocster]

  On 01/04/2020 at 10:03, ProDave said:

But I still don't see any words that make me think rental income is going to be treated as "self employment" If you are reading that into something please show me what.

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I don’t either . I am declared as a self employed sole trader . If Hmrc are going to automate this process / payments surely they can only look at a few basic details to make a broad judgement on who gets paid and who doesn’t .

[Pocster]

I fulfill all the points in that list . But that doesn’t mean I qualify . Perhaps I will and get sent the questionnaire I believe some will get sent - that might ( or might not ) be people’s downfall .

[scottishjohn]

  On 01/04/2020 at 10:08, pocster said:

I fulfill all the points in that list . But that doesn’t mean I qualify . Perhaps I will and get sent the questionnaire I believe some will get sent - that might ( or might not ) be people’s downfall .

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looking at grants that are claimable for commercial rated properties 

Iam guessing that that will be the decider 

and if it is rated as non deomestic --then up here you can claim a 25K grant-check locla council covid grants

[SteamyTea]

  On 01/04/2020 at 08:42, Cpd said:

When I ran my company in Australia I employed 6-8 people, sick pay over there is something employees see as an entitlement they need to use up before it goes out of date

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British Rail was the same in the1980s.

They also had a problem on the Tuesday after a Bank Holiday.  Was so bad they offered overtime rates to get people to turn up.

I never used trains in the 80's.