Income tax: the 'Livingstone loophole' remains open

The new rule to stop workers who are effectively full-time employees avoiding tax by being paid via personal service companies won't affect the likes of Ken Livingstone, says Merryn Somerset Webb.

There was one moment of excitement in the budget. The Daily Telegraph's Andrew Gilligan thought a new rule might have been brought in to stop the likes of Ken Livingstone avoiding tax by channelling their freelance income through companies. The relevant passage (paragraph 2.207) states that "the government will introduce a package of measures to tackle [tax] avoidance through the use of personal service companies. This will include requiring officeholders/controlling persons who are integral to the running of an organisation to have PAYE [income tax] and National Insurance (NI) contributions deducted at source by the organisation by which they are engaged."

Livingstone, as Gilligan points out, "has his six-figure income from the likes of LBC, Iran's Press TV and after-dinner speaking paid not to him directly but to a personal service company, Silveta, of which he and his wife are the sole directors and shareholders". He does this for pretty obvious reasons as do thousands of other freelancers. It allows him to pay corporation tax on his earnings at 20% and then to pay out income to himself and his wife as and when he likes in the form of dividends.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.