income tax etc....
Discussion
Just wondering if someone could tell me how much £30,500 salary is net after deductions.
Also, if someone's contracted at £25 hr how much is that net based on a 48 week year at 37hrs/wk assuming said person is paid through a Ltd company and 5% goes on admin, if their salary is the minumium wage and the rest is dividends.
Many thanks
Also, if someone's contracted at £25 hr how much is that net based on a 48 week year at 37hrs/wk assuming said person is paid through a Ltd company and 5% goes on admin, if their salary is the minumium wage and the rest is dividends.
Many thanks
Many advantages still remain if you are in a position to draw a dividend:
There is still no NI on dividends.
You still do not suffer any Income Tax on dividends until you hit the top rate of tax - but even then the dividend is still "only" taxed at 32.5% rather than 40%.
IR35 only comes into effect for "personal service" companies. It does not affect ordinary trading companies.
The recent change announced by Brown did reduce the effectiveness of dividends to save tax but he was fixing a situation he had brought about himself two years eralier - namely that companies with profits of £10,000 or under pay no Corporation Tax and a dividend paid out of those £10,000 (or less) profits would attract no Income Tax.
Now a dividend such as this would be charged to 19% Corporation Tax - the Income Tax rules have not been changed.
There is still no NI on dividends.
You still do not suffer any Income Tax on dividends until you hit the top rate of tax - but even then the dividend is still "only" taxed at 32.5% rather than 40%.
IR35 only comes into effect for "personal service" companies. It does not affect ordinary trading companies.
The recent change announced by Brown did reduce the effectiveness of dividends to save tax but he was fixing a situation he had brought about himself two years eralier - namely that companies with profits of £10,000 or under pay no Corporation Tax and a dividend paid out of those £10,000 (or less) profits would attract no Income Tax.
Now a dividend such as this would be charged to 19% Corporation Tax - the Income Tax rules have not been changed.
Gross Salary - £30,500
Less PAYE - £5,423.70
Less Employee's NI - £2,834.48
Net Salary - £22,241.82
Additional Employer's NI - £3,298.30
So in order for you, as a director of your own company, to pay yourself a net "into your hand" amount of £22,241.82, the company in total has to pay £33,798.30 (£30,500.00 plus Employer's NI of £2,834.48).
To put that another way, out of £33,798.30, the government gets £11,556.48, an effective tax rate on total salary of 34% - and you haven't even reached the 40% tax band!
In arriving at the figures I have assumed you are entitled to the standard 2004/05 personal allowance of £4,745 and that you have no additional allowances or Benefits in Kind (company cars etc).
Less PAYE - £5,423.70
Less Employee's NI - £2,834.48
Net Salary - £22,241.82
Additional Employer's NI - £3,298.30
So in order for you, as a director of your own company, to pay yourself a net "into your hand" amount of £22,241.82, the company in total has to pay £33,798.30 (£30,500.00 plus Employer's NI of £2,834.48).
To put that another way, out of £33,798.30, the government gets £11,556.48, an effective tax rate on total salary of 34% - and you haven't even reached the 40% tax band!
In arriving at the figures I have assumed you are entitled to the standard 2004/05 personal allowance of £4,745 and that you have no additional allowances or Benefits in Kind (company cars etc).
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