Today's Budget

ukcarper

FTBFun wrote: »

Interesting.

Normally a self employed person with £52k of profit would be taxed as follows:

£52k - £7475 = £44,525 taxable income
£35k @ 20% = £7k
£9,525 @ 40% = £3,810

Class 4 NIC: first £7,225 exempt
£35,250 @ 9% = £3,172.50
£9,525 @ 2% = £190.50

So total tax of £10,810, NIC of £3,363. Net profit after tax of £37,827.

If you had £25k of profit:

£17,525@ 20% = £3,505
£17,775 @ 9% = £1,599.75

So tax and NIC of £5,104.75

Running it through a company, paid in dividends with a small nominal "salary":

Corp tax on £52k
- £7,070 salary = £44,930 @: 20% = £8,986

Net profit available to be distributed as a dividend:
£44,525 - £8,986 = £35,539

Tax on individual:

Salary £7,070 (no tax or NIC)
Dividends £35,539 (10% tax credit so no tax).

Total tax £8,986. Which is nearly double what someone on £25k would pay.

EDIT: you added a bit on cabbies whilst I was typing. HMRC are going after cabbies at the moment as they think there is systemic tax evasion there, which is what you've been hinting at.

Do I understand this correctly and if you become a company you save £5487 (£14173- £8966)