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Can you please explain in detail how to approach this question. I have attempted many questions like this but i still seem to get stuck while attempting it. Please explain to me in detail what i should think about when solving a question that asks us to calculate the additional tax and how to to calculate the question.
You should assume that today’s date is 15 March 2022.
Buck Star is the managing director of, and 100% shareholder in, Frothy?Coffee Ltd.
For the tax year 2021/22 Buck will have director’s remuneration of £65,000 from Frothy?
Coffee Ltd. On 25 March 2022 he wishes to withdraw a further £50,000 from the company,
either as additional director’s remuneration (the gross remuneration will be £50,000) or as a
dividend.Calculate the additional income tax liability and national insurance contributions
that Buck will have for the tax year 2021/22 if he(i) withdraws additional gross director’s remuneration of £50,000, or
(ii) extracts a dividend of £50,000.Firstly, the current position of the individual – they are high rate so anything they take out of the business will be taxed at high rates and you do not have to do a full calculation of income and tax. just apply the high rate tax/NIC to whatever income they receive.
So salary – 40% and 2%
Dividend – look at starting rate and then apply hr %
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