Uk Income Tax, NI & Corporation Tax
- From: "PlusNet" <mark@xxxxxxxxxxxx>
- Date: Sun, 27 Sep 2009 14:06:51 +0100
Could anyone help me understand the tax framework in a little more clearly.
I've just setup a private limited company. I will have three sources of "income"; a Salary from the company, dividends drawn from the company profit and interest on some savings.
This is my understanding so far;
- I will pay "Income Tax" on the Salary and Savings interest, but;
- I will not pay Income Tax on the first ~£6.3k ("Personal Allowance" combined Salary and Savings interest) BUT will pay 10% tax specifically on the Savings interest if the combined salary and savings is less than ~£2.4k
- Income tax will be 20% of the combined Salary and Savings interest between ~£6.4k to ~£40k
- A further tax of 40% will be levied on any combined Salary and Savings interest above ~£40k
- I will pay National Insurance on the Salary (but not the Savings interest), at the following rate;
- nothing, if the Salary (excluding savings interest) is <£5k otherwise a fixed annual payment of £2.40 if the Salary (excl savings interest) is <~£5.7k
- if the Salary is >£5.7k, then NI is 8% of Salary (not levied against Savings interest)
- if the Salary is >£43.8k, then an additional levy of 1% is payable on the amounts over the £43.8k
Corporation Tax is applied to Net Company Profits (less any Expenses and Charges on Income... more later...) at 21%
Dividends can be taken as income from whatever Profit is left after Corporation Tax, and are subject to the following tax
- if Total Income (in my case Salary plus Savings interest) <~£37k, Dividends are taxed at 10%. Otherwise, a rate of 32.5% is applied to any Dividends above this threshold
- Tax relief of 10% is given on the first ~£6.4k of Dividends (excl Salary and Savings)
This is what I've gleaned from HMRC and a number of sites, but I'm not sure I've quite got it right?
Coming back to Corporation Tax, can anyone point me in the direction of information which makes it clear what expenses I can and cant claim tax releif on? I have the HMRC "480" PDF but I find it impenetrable.
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