I am a bit stuck on this one. I am curious as to the savings between soletrader and a limited company. Its just i have heard of some people saying about the savings but i have yet actually calculated this myself.
If the Net Profit is £87,730, i am looking to find out the tax payment from a soletrader and from a director with a salary of £6,475.
I have ran the figures tru online calculators and i have been able to follow the soletrader calculation.
However with the Dividend/salary section, i have been unable to follow all of it. Below is the calculations which the free online calculator has given me. I can follow everything up to the Net company profit of £64,115. However i have no been able to figure out how the £7,613.78 tax on dividend has been calculated.
I would be grateful if someone could explain this to me.
£87,730 Gross profit b4 Salary £6,475 salary from gross profit £96.64 Employers NI from gross profit £83.05 Employees NI on basic salary £81,158.36 new gross profit declared £17,043.26 Corporation tax on gross profit £64,115.10 Net company profit £7,613.78 tax on £64,115.10 NET DIVIDEND £24,836.72 Total taxation
My thanks for your help. Mickey
-- Edited by Mickey on Monday 14th of March 2011 03:14:28 PM
The other thing - the 10% tax credit is just that a tax credit for someone on Basic Rate tax. So this tax is not included in the total taxation figure - because its a paper figure. No tax is actually paid.
Many thanks for your reply. I am simply trying to work out the tax savings.
From my calculations, income tax paid on soletrader profit/income of £87,730 is around £28,638. which is more or less thesame as the online calculator i used.
With regards to the salary/dividend, my calculation of the tax credit and the gross up amount is thesame as yours. Grosed up £71,239 and tax credit £7,123.9.
so do you then calculate 10% @ £37,400 with amounts over £37,400 @ 32.5% and then deduct the tax credit?
Did you know that if you pay a salary above the NI lower earnings limit, Primary Class 1 but below the Primary threshold, no National Insurance become due, but the person receives national insurance credits as if they had paid contributions!
-- Edited by YLB-HO on Monday 14th of March 2011 05:31:31 PM
Gut feeling is that there would be tax savings from a company, which could be vastly helped if the shares were held by H&W, but we don't have sufficient info.
But at least the extra tax on the dividends is only paid if dividends above £43k and the directors can control when they are paid.
