To think that computing/IT is a poor career choice?

[iamarobot]

Hi,

In terms of earning potential and barrier to entry, is IT as a career path really a bad one in 2011? I see the news report that there is a shortage, and then there is a story about Indians being shipped in by foreign companies. It's a shame really, as I quite like computers. Maybe I should take a look at the green energy careers leaflet i have around here somewhere....:s

They don't pay basic rate tax, they pay themselves through a ltd co and pay corporate tax

witchyhills, without wishing to be rude, you appear to have a poor grasp of this.

Do you mean that the person having an income of £100,000, per my example, only pays 20% tax? If you believe this, please explain why you believe it, and how you think it works.

As far as I am aware, you can what witchyhills says. You become a limited company, pay yourself a wage of minimum wage value, and don't pay tax on the dividends as a bonus. However, it's only legal to do so if you have more than one client for your limited company, not hired on a rolling contract by one company for example.

IT is such a broad career range, OP, you need to break it down much more. I started my IT career (web) as a programmer in the non-profit sector 8 years ago with no IT qualifications (PhD in a social science subject!) and ended up last year in client services (still in web) and earning in 40% tax bracket. I no longer work in IT but my little corner of the industry treated me very well.

My last agency recruited loads of "cheap" programmers from eastern Europe (even cheaper than from India) but the lead programmers running the show as well as the lead programme managers, client service directors, project managers, business analysts etc (all of whom earned £££s) tended to be local to the UK and ranging in age from 30s to 50s.

piglet - UK dividends are taxable but they are not income. They are taxed on a different schedule. Dividends of foreign companies are taxed differently again and if we have a tax treaty with the foreign country in question, then tax (if there is any) is paid there, rather than in the UK.

Paying yourself through dividends from a Swiss company, paid into a Swiss bank account, and then transferred as cash remittances to the UK is a (reasonably) legal wheeze and a very low tax way of paying yourself. I currently have 2 contractors working on a project for an investment bank and they have created a Swiss ltd for this very purpose.

And I think you meant IR35, not IR34.

malinois
I have great difficulty with this:
"piglet - UK dividends are taxable but they are not income."

compare HMRC "What counts as taxable income?"..."Investment income
Dividends on company shares - not including dividend income from ISAs."
www.hmrc.gov.uk/incometax/taxable-income.htm

and
"To work out if you're a taxpayer follow these three steps:
?add up all your taxable income
?work out your tax-free allowances
?take your tax-free allowances away from your taxable income"
www.hmrc.gov.uk/incometax/basics.htm

I don't agree with your statement "Dividends of foreign companies are taxed differently again and if we have a tax treaty with the foreign country in question, then tax (if there is any) is paid there, rather than in the UK"

I am familar with double taxation relief where, if you are a UK taxpayer, you declare your income, including dividends and including foreign dividends, where you state the income tax or withholding tax deducted in the country of origin, and, if the UK has a tax treaty with that country, this is knocked off the tax that is calculated as payable on those gross dividends in the UK. However I do not recognise the process you are describing.

I would go so far as to say that you are mistaken.

Would you like to show me a simple worked example of how you understand it works?

It is important to note that I am talking about UK citizens, who are resident in the UK for tax purposes.

NanettaStocker
"As far as I am aware, you can what witchyhills says. You become a limited company, pay yourself a wage of minimum wage value, and don't pay tax on the dividends"
Nanette, this is not correct. You pay tax on dividends at your highest marginal rate. You do however get a notional 10% non-reclaimable tax credit on tax already considered to have been paid by the company paying the dividends.

IIRC dividend tax rates are 10/32/42 cf 20/40/50 for income tax. But this is f

(contd) UK shares only.

So pay yourself an LEL salary from your Swiss company (paying income tax and NI obviously) then pay yourself dividends from your Swiss company into your UBS account paying 5% dividend tax.

As you have already payed Swiss taxes, you will not be liable for UK taxes under the UK-Swiss tax treaty.

mal

I'm glad you raised that point as it seems to be a common misconception.

"As you have already payed Swiss taxes, you will not be liable for UK taxes under the UK-Swiss tax treaty."

That is not true.

www.hmrc.gov.uk/taxon/foreign.htm#2

"How much foreign tax credit relief will you get?
You'll get relief on the lower of:

?foreign tax payable under the terms of the agreement
?the amount of UK tax due "

www.hmrc.gov.uk/taxon/foreign.htm

As I said earlier, the amount of UK tax due, is the same as if it was it was a UK company, but they subtract the amount of tax already paid in the country of origin, as an allowance, if there is a tax treaty.

[shrug] it's a dodge then. I can't believe for a minute they would be doing it if there wasn't an advantage. Presumably HMRC has no way of finding out how much you are paying yourself in foreign dividends into a Swiss account.

you might also be interested in

www.hmrc.gov.uk/employment-status/details.htm

"The legislation applies whether the remuneration is received directly or indirectly and whatever the form in which it is received by the worker.

The legislation also applies whether the MSC is based within the United Kingdom (UK) or outside the UK. If the MSC is based outside the UK for the purpose of seeking to avoid the legislation, there is a greater likelihood that HMRC will invoke the transfer of debt provisions.

Where an MSC is unable to pay its PAYE and NICs liability, its debt can be transferred to third parties. These include the company's directors, the MSC Provider, and in certain circumstances, other third parties. "

By "other third parties" they mean the "employer" or client who pays, the agent, or the accountant who cooked it up - they will usually go first after whoever they think has got the most money. I have no personal experience of attempting scams, but I have observed that a lot of intermediaries are very reluctant to run the risk of getting stuck with someone else's tax and NI bill.

I've worked in IT since graduating in 1995 with a biochemistry degree. I have never been out of work & worked freelance fir £500 a day. I move around with my husband who is in the military and I have no trouble finding work even when we lived in Norfolk! I have programmed, run teams, worked in support and project managed. Now I work as a business analyst which I really enjoy. Good BA's are in high demand. I work at project level and a strategic level, with call centre staff to board level directors. Each day is different. You have to be a good communicator and pick complex subjects up quickly. Technology use and how it shapes our lives wil only increase in the future. The world is your oyster. Exciting times are upon us. I have 2 DC's & work 3 days a week. I earn very good money & am not in London. Sometimes I wish i'd been a doctor or vet but I leave the office at 5 and spend time with family. There are probably more exciting careers out there but to be honest you can work in any industry because all industries need IT. Good career to use as a stepping stone as it's always useful to have a strong technical background. Plus work with lots of men so lots of laughs in the office!

james, you have to pay for advertising. Not just bump an old thread.

YABU - and making some awful sweeping statements.

That's like someone saying, I don't know much about a career in Fashion, so it must be a bad career choice

yabu