A Lesson

[Unlucky4Sum]

Well he seems to eb convoluting both Corporate and Business taxes in the one breath.
If he is paying Corporation Tax, it means he is operating as a Limited Company. A Director of a Limited Company should still be taking his Drawings through PAYE.
I am surprised that he takes his direct drawings at the Higher Rate though, as it is far more tax efficient just to draw the £12,500 personal allowance and then take the rest as Dividend Interest with a another £2000 tax free allowance and a flat rate of 20% for the balance.

Also surprised that he has not even touched on Overseas Earnings Double Taxation Jeopardy, considering how much of this income is generated by working abroad, but hey, what do I know.

I modelled several scenarios for the marginal effect of this ludicrously mythical car cleaner that pays higher rate income tax AND whose company makes over £250k a year in profit despite apparently using Dumbo and Thicko Ltd as his accountants.

If all the (net of VAT) on the £10 was taken as profit then what was left after corp tax as dividend the max take by the government was £6.21.  If all the (net of VAT) on the £10 was taken as paid salary the take by the government was £6.08.  If it was split 50:50 then the gov take was unsurpisingly £6.15

As PS pointed out the tax taken on spend is irrelevant as there are plenty of ways to spend on VAT free items.

So even with a bizarre case and a stupid financial plan that £7 is mythical and certainly no basis for a 'lesson'.  As I said 'dodgy maths'

Google Spreadsheet

[Nick]

Well he seems to eb convoluting both Corporate and Business taxes in the one breath.
If he is paying Corporation Tax, it means he is operating as a Limited Company. A Director of a Limited Company should still be taking his Drawings through PAYE.
I am surprised that he takes his direct drawings at the Higher Rate though, as it is far more tax efficient just to draw the £12,500 personal allowance and then take the rest as Dividend Interest with a another £2000 tax free allowance and a flat rate of 20% for the balance.

Also surprised that he has not even touched on Overseas Earnings Double Taxation Jeopardy, considering how much of this income is generated by working abroad, but hey, what do I know.

I vary the ways that I take money, but the upshot is that whichever way you cut it, it represents around 50% in direct tax. Are you saying that you think we don't pay 20% in indirect taxation on what we buy?

[Sampanviking]

Look it's a simple fact that a business profit is revenue minus costs that include taxable salaries.  So you can't pay 40% income tax + NIC on the profits (that can be taxed at 25% over 250k +dividends can be taxed at 39.4%)

And we haven't even got to your bizarre supposition that all that 70% goes to pay people for doing nothing.

You got your maths wrong Nick and have reacted as usual to false assertions being pointed out and pointed out far more politely than you challenge others.



 

Well he seems to eb convoluting both Corporate and Business taxes in the one breath.
If he is paying Corporation Tax, it means he is operating as a Limited Company. A Director of a Limited Company should still be taking his Drawings through PAYE.
I am surprised that he takes his direct drawings at the Higher Rate though, as it is far more tax efficient just to draw the £12,500 personal allowance and then take the rest as Dividend Interest with a another £2000 tax free allowance and a flat rate of 20% for the balance.

Also surprised that he has not even touched on Overseas Earnings Double Taxation Jeopardy, considering how much of this income is generated by working abroad, but hey, what do I know.

[Unlucky4Sum]

Look it's a simple fact that a business profit is revenue minus costs that include taxable salaries.  So you can't pay 40% income tax + NIC on the profits (that can be taxed at 25% over 250k +dividends can be taxed at 39.4%)

And we haven't even got to your bizarre supposition that all that 70% goes to pay people for doing nothing.

You got your maths wrong Nick and have reacted as usual to false assertions being pointed out and pointed out far more politely than you challenge others.

 

[Nick]

Next up you can't be paying 40% income tax + NIC on profits taxed as Corporation Tax.  One or the other.

What a load of rubbish, it's not even worth debating it with you. 

[Unlucky4Sum]

Even at 2% I am still paying over 70% in tax, something you argued doesn't happen. So proving my OP is correct.

You need to get a new accountant then.  That is if you're really paying 70% tax for the cleaning cars example of your OP

Next up you can't be paying 40% income tax + NIC on profits taxed as Corporation Tax.  One or the other.

[Nick]

How charmless Cromwell

Maybe you should be asking Nick why he thinks he is paying 10% NIC and 40% tax at same time when the personal NIC rate falls to 2% for the income that 40% tax rate applies to.

Even at 2% I am still paying over 70% in tax, something you argued doesn't happen. So proving my OP is correct.

[Unlucky4Sum]

Well as has been pointed out your reputation goes before you and when given the benefit of the doubt do what you do best as you always do.

If showing up blatantly false stories for what they are is a bad thing in your book, maybe you should get another book.

The OP is obviously false, why shouldn't I point that out?

[cromwell]

How charmless Cromwell

Maybe you should be asking Nick why he thinks he is paying 10% NIC and 40% tax at same time when the personal NIC rate falls to 2% for the income that 40% tax rate applies to.

Well as has been pointed out your reputation goes before you and when given the benefit of the doubt do what you do best as you always do.

[Unlucky4Sum]

How charmless Cromwell

Maybe you should be asking Nick why he thinks he is paying 10% NIC and 40% tax at same time when the personal NIC rate falls to 2% for the income that 40% tax rate applies to.

[cromwell]

That 70% is actually what's called a marginal rate and while it's very wrong IMHO those paying it are not paying 70% on their overall earnings.  And while Nick isn't saying he's based it on tax he has replied listing a whole load of taxes he falsely supposes can be added linearly.

We still await Nick's maths to justify his OP.  I won't hold my breath.

That 70% is actually what's called a marginal rate and while it's very wrong IMHO those paying it are not paying 70% on their overall earnings.  And while Nick isn't saying he's based it on tax he has replied listing a whole load of taxes he falsely supposes can be added linearly.

We still await Nick's maths to justify his OP. I won't hold my breath.

Really ? We can but hope.

[Unlucky4Sum]

And you wonder why you have the reputation you have.

Oh the irony

But hey ho thanks for admitting you are never going to be able to back up that OP

[Nick]

That 70% is actually what's called a marginal rate and while it's very wrong IMHO those paying it are not paying 70% on their overall earnings.  And while Nick isn't saying he's based it on tax he has replied listing a whole load of taxes he falsely supposes can be added linearly.

We still await Nick's maths to justify his OP.  I won't hold my breath.

And you wonder why you have the reputation you have.

[Borg Refinery]

He has justified his OP.

[Unlucky4Sum]

There is a 70% 'effective' tax in at least one instance

https://taxpolicy.org.uk/2024/06/06/tories_accidental_70_percent/

Also, Nick never said anything about this being analogous to taxation, it was a general point

I disagree with it, as Labour are doing the best they can to turn the country around and pledged no new taxes

That 70% is actually what's called a marginal rate and while it's very wrong IMHO those paying it are not paying 70% on their overall earnings.  And while Nick isn't saying he's based it on tax he has replied listing a whole load of taxes he falsely supposes can be added linearly.

We still await Nick's maths to justify his OP.  I won't hold my breath.