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I think what a lot of people forget to mention / misunderstand about LtdCo contracting is that, yes you can choose to draw a small PAYE salary and take little t

I think what a lot of people forget to mention / misunderstand about LtdCo contracting is that, yes you can choose to draw a small PAYE salary and take little to no dividend and pay next to no tax in a particular tax year, if you so choose. However, the surplus funds belong to the business, not the individual, and reside in the business bank account. Should the contractor choose to leave this "profit" in the business, it is taxed according to UK Corporation tax rules. Should the contractor draw this profit down via PAYE or dividends or Directors loans or whatever, it triggers tax events, which will result in tax due on the contractors Self Assessment. A quick run of the numbers from your post on contractorcalculator.co.uk suggests the contractor pays substantially more tax on the income than the waiter, assuming the contractor is running their business within HMRC's rules. edit: forgot to mention corporation tax liability in addition to SA liability.

mmarq 4y ago
The truth is that these Ltds were vehicles to avoid taxes, not real businesses. These contractors were effectively employees that managed to get payed in a way that allowed them to avoid taxation. I know people that payed close to 7% total tax before IR35, as much as somebody earning 15K per annum. IR35 doesn’t prevent real businesses from operating as usual. It prevents masked employees (people that attend standup, have a company email, have an account on Teams, effectively report to a manager, etc…) from avoiding taxes and claiming iPhones and PlayStations as expenses.