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COMPANY V SELF-EMPLOYED

There have been a number of changes in tax law which may create some tax planning opportunities. These savings could be even greater if you are currently a partnership.

The main changes are :-

The rate of Corporation Tax has fallen far greater than the rate of personal tax.

NI has increased by 1%.

With the abolition of ACT, it is now a lot easier to take dividends as a way of getting funds out of the company, and if you remain below the 40% tax bracket, no further tax is due on the dividend taken.

The introduction of the Stakeholder Pension means that you can invest £3,600 pa, without having any income or salary.

However, you should be aware of two major factors which exist. Firstly, there could be IR35 implications, and secondly, there are now anti-avoidance rules with regard to unfair pay policy.

There may be a host of other reasons why you do not want to incorporate, but please talk this matter through with us as the savings can be rewarding.

Example 2006/2007 Tax Year

A sole trader earning £35,000 net trading profit verses a company with a profit £35,000, then a basic salary plus the balance by dividend.

	Sole Trader		Company
Profit	35,000	Profit	35,000
Personal Allowance	4,745	Salary, no tax	4,745
	30,255		30,255

Tax		Corp Tax	5,748
NI		Personal Tax	0
Total Tax			5,748

Total Annual Saving

For more information please contact us.

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