Self employed earning over £50000

[candle18]

I feel the govt have been a bit unfair capping the self employed income at £50000 but not for PAYE people. My brother is a solicitor in a firm but classed as self employed as he is a salaried partner. He has earned slightly over £50000 but still has a family to support. His work have furlonged a lot of employees but have told the partners that they have to prepare for minimal wages over the next 6 months but are still expected to keep working. If a couple both earn £45000 however they can both claim. Anyone else in this situation.

Five posts of personal abuse there, you need to calm it down a bit.

Is this real? It seems bizarre that a partner at a law firm would ever earn £50k. A lot of newly qualified lawyers earn more than that
I'd always expect a partner at a tiny firm to be on minimum £100k, big firm from £200k first year elected up to multiple million.

Same situation here - sympathies.

I am a sole trader, 10 years of paying tax on absolutely everything I earn at the same rates at a PAYE employee, but earn more than £50K so no help. Single parent in London, so while it's more than a lot of people, it's not a fortune!

Work will likely drastically reduce. The reverberations on the sector I'm in will be seen for at least a year after all this ends. I do have savings so will be OK I think. Many don't, and that's understandable.

I'm not sure why all sole traders couldn't be included in the scheme. It's very disappointing. And galling that I'll still be asked to pay the tax hikes after this. Never trust a Tory!

Isn't it 50k profit? Not income?

So what you pay yourself isn't included in your profit.

@lizzie1970a you did make a choice. But by all means leave us thickos to stew in our mundane little lives. That you don't know anything about.

Depends on the sort of law squeakydog. If you are doing legal aided criminal defence work in a small firm then 50k is quite good going.

"Your self-employed trading profits must also be less than £50,000"

Profits, not salary.

@tonyaster - profits and income are the same thing. For sole traders anyway.

Here's how it works:

Say I charge my clients a total of £60,000 a year for my services.

It costs me £5,000 to provide those services. Say I need to buy a laptop, pay for an office etc. I don't have to pay tax on these 'expenses'.

That leaves me with £55,000. I pay tax at the same 20%/40% rate as a PAYE employee on this amount, and the amount left over is what I live on. There are no 'profits' over and above this.

There are other set-ups, but this is how sole traders work.

Single earner households are getting screwed over every which way just like they did with the child benefits. Two earners on 49k will be rolling in it compared to a single breadwinner on 100k and will have been paying less tax all these years too.

I assumed you could pay yourself a salary?

Given that DH will have earned more than 50K this year apart from the fact he'll potentially be missing a couple of months money, I think t's very fair to defer paying tax on account (crippling amount as he earned a LOT more last year), defer VAT and by then we'll know this current year's tax so pay a lot less rather than the crippling amount on account in July, I don't think it'd be any different to any other quiet year.

profits and income are the same thing

Trading profit is business income less expenses.

The net cash you end up with after tax/your personal income is a different thing again.

It not unusual for partners in smaller
regional law firms to be earning 50k (or less) @squeakydog - I think a lot of people have a hugely inflated idea of what solicitors outside of the corporate finance / private practice/magic circle earn..but that's a discussion for another time

A sole trader can't hire themselves as an employee to pay a salary. It's not legally possible.

For the people who don't understand how it works. In SOME partnerships you enter on a reduced share of profit and build it up over a period of years to a 100% share, so yes for a small firm, partner for 2 years that could be right. OPs brother is not lying to her.

No more queries on what he earns yeah?

@tonyaster

No, if you are a sole trader (rather than a director of your own limited company) you do not pay yourself a salary. Your income is whatever your trading income is, less your expenses.

You may well take out e.g. £2,000 in drawings into your personal bank account every month but it's not a salary, it's simply taking your own money out of the business. You are still taxed on it whether you leave it in the business or take it out.

OP - they need to be brutal and furlough as many staff as possible. Reduce overheads, increase cash.

When we're back out the other side of this, if there's work, they can come back. If not...redundancy.

People should not be complacent that furlough means getting your job back. There may be no work and they will be made redundant.

Deanetta thank you!

Just to add another point here.

I have seen many posts over the years, people being critical of the income of some self-employed, high earners. Many run their own companies.

They are taking a risk, this is a time when that risk has become apparent.

I for one am a huge supporter of the entrepreneur, employing people, taking risks and have never begrudged a single penny they earned.