Computing Taxable Total Profits and Corporation Tax Liability Essential Reading

Question 1

What happens for an individual starting in business?

Answer 1

Must decide whether to trade as a sole trader or as a company

Question 2

If a company is used?

Answer 2

Individual can be both a director and a shareholder of the company

Question 3

What does a sole trader pay and NIC?

Answer 3

Pays income tax on trading income and Class 2 and Class 4 NIC

Question 4

What does a company pay corporation tax on?

Answer 4

Its taxable total profits

Question 5

Any director’s renumeration is associated with?

Answer 5

Class 1 NIC and is deducted in computing taxable total profits

Question 6

When is employment allowance not available?

Answer 6

If the director is the only employee. An amount equal to remaining profits after corporation tax can then be paid out to shareholders as a dividend

Question 7

What does an individual as a shareholder pay?

Answer 7

Income tax on dividend income

Question 8

What does an individual as a director pay?

Answer 8

Income tax on employment income and Class 1 employee’s contributions on cash earnings

Question 9

Dividends and NIC?

Answer 9

No NIC on dividends

Question 10

What is most tax-efficient?

Answer 10

To extract profits from a company as a mixture of renumeration and dividends