Payroll and associated taxes

Question 1

Personal allowance for 23-24?

Answer 1

£12,570

Question 2

Basic rate band and tax rate?

Higher rate band and tax rate?

Additional rate band and tax rate?

Answer 2

Basic: £12,571 - £50,270 @ 20%

Higher: £50,271 - £125,140 @ 40%

Additional rate: £125,141 @ 45%

Question 3

Dividend allowance?

Dividend basic rate?

Dividend higher rate?

Dividend additional rate?

Answer 3

Dividend allowance = £1,000

Basic rate = 8.75%

Higher rate = 33.75%

Additional rate = 39.35%

Question 4

Capital gains annual exempt allowance?

Capital gains Basic rate?

Capital gains Higher rate?

Answer 4

CGT annual exempt amount = £6,000

Basic rate = 10% (portion of CGT falling below total taxable income £50,270 taxed at 10%)

Higher rate = 20%

Question 5

What NICs are payable by an employer

Answer 5

Class 1 NICs are due from employers, paid at 13.8% of gross pay on annual earnings greater than £9,100 PA.

Class 1a NICs are due on taxable employee benefits at 13.8% of the monetary value.

If employing apprentices, the limit becomes £50,270.

Question 6

What NICs are payable by an employee?

Answer 6

Below £12,570 = 0%

£12,570 - £50,270 = 12%

£50,271 and beyond = 2%

Question 7

What are the implications of incorporation?

Answer 7

1. Change in tax structure: ST = income tax paid on all profits, done via self-assessment. Ltd = corporation tax paid on profits
2. Self-pay decision: dividends versus salary
   - Salary = e’ee and e’er NICs which are CT deductible
   - Dividends = no NICs, lower tax rate which are not CT deductible (paid from PAT)
3. Capital gains: individual pays as previously outlined, companies pay CT on chargeable gains. Incorporation relief likely to be available for ST - Ltd, therefore no CGT due.

Question 8

Do sole traders need to produce financial statements

Answer 8

No - they complete self assessment tax returns

Question 9

What is the most tax beneficial ratio of salary versus dividend for a company employing one individual?

Answer 9

Salary = personal allowance, balance = dividends

Question 10

What is the personal allowance threshold / limit (before being tapered)?

Answer 10

£100k - the personal allowance reduces by £1 for every £2 above this threshold

Question 11

What NICs are payable by a sole trader?

Answer 11

Class 2 = £3.45 per week if profits > £12,570

Class 4 = 9% between £12,570 - £50,270
Class 4 = 2% on greater than £50,270