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Gas and Electricity Prices

Mike Reed said:
The dividend tax, although raised in April from 7.5% to 8.75%, still represents a low tax compared to other forms of unearned income. Even CGT for lower rate taxpayers at the lowest is 10%, property 18%, savings interest (above £1000) is 20%. Okay, you can factor risk into these comparisons but tax, as far as I know, isn't correlated with risk. At the mo' BBs at 2.25% overall is at least as good as easy access ISAs and I've certainly noticed a hike in winnings over the past 2 months (though that might be just a lucky anomaly, of course).
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Remember if you are taking dividends from your own business, you can only do so after paying 19% corporation tax on your profit (rising to 25% in April). Higher rate div tax is 33.75%. With a 1.25% increase that’s 35%. That will give an effective tax rate of 60%. Sod that.
 
Ponty said:
Remember if you are taking dividends from your own business, you can only do so after paying 19% corporation tax on your profit (rising to 25% in April). Higher rate div tax is 33.75%. With a 1.25% increase that’s 35%. That will give an effective tax rate of 60%. Sod that.
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Presumably business owners pay themselves a salary too, which comes out before profits? So any dividend is extra above whatever salary they take. If you're paying a dividend at a level that puts you into higher rate, presumably that's >£50k then you'd be paying 45% if you took it as PAYE. ISTM this is largely about discouraging business owners from using divs and encouraging greater use of PAYE.
 
Sue Pertwee-Tyr said:
Presumably business owners pay themselves a salary too, which comes out before profits? So any dividend is extra above whatever salary they take. If you're paying a dividend at a level that puts you into higher rate, presumably that's >£50k then you'd be paying 45% if you took it as PAYE. ISTM this is largely about discouraging business owners from using divs and encouraging greater use of PAYE.
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The big problem with paye is employers NI (a cost which many employees are completely unaware of). As a business owner you pay both employers and employee NI so salary gets very expensive. Most business owners will draw a salary between the LEL (lower earnings level) and PT (primary threshold) in order to quality for an NI year and pay the rest in divs. Many will be making sure that even if they can pay more, will restrict earnings to under the high rate threshold and hold retained profits (which are subject to CT). You can chuck into a pension (£40K) but even this might be under attack. All this assumes, of course, that your business isn’t sinking. The incentive to crack on is fast disappearing.
 
Ponty said:
That will give an effective tax rate of 60%
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It won't, because the income tax is based on 35% of the 75%. Effective tax rate comes out at 51.25% which would then need to be compared to the tax/NI on salary less the corp tax savings. All very standard small accountant stuff.
 
gingermrkettle said:
It won't, because the income tax is based on 35% of the 75%. Effective tax rate comes out at 51.25% which would then need to be compared to the tax/NI on salary less the corp tax savings. All very standard small accountant stuff.
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No income tax being paid (at high rate). Paying high rate div tax after corp tax (after having paid upto the high rate threshold in a combination of salary and divs), so it’s the effective marginal tax rate.
 
No.

Make £100 of pre tax profit, pay £25 of corp tax to give £75 distributable profit.

Declare and pay dividend of £75, personal income tax liability on that dividend if at a higher rate tax rate of 35% would be £26.25 giving a receipt after all tax liabilities of £48.75 out of the original £100. Total tax liability is £51.25.
 
gingermrkettle said:
No.

Make £100 of pre tax profit, pay £25 of corp tax to give £75 distributable profit.

Declare and pay dividend of £75, personal income tax liability on that dividend if at a higher rate tax rate of 35% would be £26.25 giving a receipt after all tax liabilities of £48.75 out of the original £100. Total tax liability is £51.25.
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Yes, correct. Good job I leave this stuff to the accountant, he‘s saving me more than I thought!
 
My wife is co-head at the local primary school (approx 400 kids). She told me this morning that the school's energy costs are projected to rise from £16k pa to £92k pa ! Quite how they'll be able to cover that is unclear. This is on top of an already stretched budget after the govt's recent pay rise for teachers, which is all well and good, except that the school has not been given any extra funding to cover it, they are expected to re-allocate from their existing budget.
 
jimbob75 said:
they are expected to re-allocate from their existing budget.
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Which used to be allocated and administered by local authorities. Maybe still is? Maybe the gov't education grants to these local authorities have been frozen. However, energy use is one thing, but if teachers' salary rises are a central government responsibility and they've frozen the grants, thereby lies the financial anomaly, with energy (unless subsidised) the straw which............
 
jimbob75 said:
My wife is co-head at the local primary school (approx 400 kids). She told me this morning that the school's energy costs are projected to rise from £16k pa to £92k pa ! Quite how they'll be able to cover that is unclear. This is on top of an already stretched budget after the govt's recent pay rise for teachers, which is all well and good, except that the school has not been given any extra funding to cover it, they are expected to re-allocate from their existing budget.
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Almost exactly the same as the position we were in several weeks ago.
That will be £1+ per Kwh - & some 5+ x what they pay now.
After (much) shopping around we are now at 64p ish per Kwh, + SC.
How schools and others such are supposed to allocate funds is beyond me.
 
You’d like to think that the govt, who must be the largest single user of gas / electricity in the UK, would have a master agreement with all energy suppliers to ensure that each of the tens of thousands of buildings supplied were receiving best possible pre negotiated terms, irrespective of who runs the building etc. Probably on the ‘too difficult’ pile…
 
Mike Reed said:
Which used to be allocated and administered by local authorities. Maybe still is? Maybe the gov't education grants to these local authorities have been frozen. However, energy use is one thing, but if teachers' salary rises are a central government responsibility and they've frozen the grants, thereby lies the financial anomaly, with energy (unless subsidised) the straw which............
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Yes, local County Council, but afaik no additional funds have been allocated from the Govt to the LA or school.
Still, a great self-congratulatory headline isn't it? 'Govt announces pay rise for teachers' (*cough* schools to pay for it themselves)
 
Could be an interesting week. Seems only those on benefits will receive energy support from April. All they had to do was cap the consumption level of subsidised energy at the price cap quantities. Instead they (i.e. we) are funding people heating big houses, second homes, swimming pools and charging expensive EV’s over the winter. Muppets.
 
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