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Freelancers' NI niggle


Your article 'Freelancers face tax threat' (NCE 17 February) claims that freelance workers 'avoid tax and national insurance'. In addition to paying the usual employee tax and national insurance, those employed by their own companies are also liable for the employer's NI contribution (currently 12.5%).

Under company law, it is possible to draw a proportion of income as dividends which are still subject to the full rate of tax but do not attract national insurance. In this way, it is possible to offset some of the employer's NI paid on that income taxed as salary.

Pay rates in the engineering industry are insufficient to do this for someone with average monthly financial commitments. Add to this accountancy fees, and freelancers find themselves significantly financially disadvantaged compared with permanently contracted members of staff, who also enjoy other benefits. Often this is not a matter of choice.

David Jessop (M), 1 Old Stables, Palace House Road, Hebden Bridge, West Yorkshire HX7 6HW

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