Limit yourself & save £ € $
CHANCELLOR Gordon Brown wants freelances to pay less tax and national insurance. That may sound strange, given his ambitious plans to pump millions into education and the NHS, but it's true.
The economic miracle that has given the ebullient Mr Brown the warchest with which to invest has come not from big business, but from small firms and individual sole-traders. And it is that sector of the economy - which includes freelance journalists - that he has deliberately courted with incentives and tax breaks. The combination of stakeholder pension rules and friendly policies towards small businesses and capital investment is designed to ensure that even those earning small sums from their trade continue to thrive without relying on state benefits. He knows that these people - that's you and me - make significant contributions to our sector of the economy and to our local areas.
And he has made setting up as a company even more attractive because, although the Treasury loses out on the statistical total it could reap in tax and NI, it saves a fortune in collection costs. It gets more to spend on Britain's vital services as a result. The cost of collecting corporation tax (on your company's earnings) and VAT (on what you buy with the money you save) is massively lower than the cost of collecting income tax and National Insurance.
Even the lowest-earning freelance can save more than £1,000 a year in tax and NI by forming a limited company - "incorporating". Those earning more than £20,000 can make substantial savings. There are costs involved, and it may not suit everyone, but all freelances should consult their accountant to weigh up the pros and the cons.
Many NUJ freelances have been limited companies for years. Although the tax benefits have only been in place for a couple of years (and they were made more generous this year), there are other benefits for those involved in training, photography, giving advice and publishing in their own right.
But remember, it's not a tax dodge. If you are currently correctly taxed at source, becoming a company doesn't get round the rules. He may be generous, Mr Brown, but he's not stupid.
- This is what Chris submitted as what he would have said, had he made
it to the July Branch meeting reported in the article linked below