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This question gave the details of a self employed person’s tax (Income tax and NIC liability) and asked what will be tax payable if the business is registered as a company and 1) the profits are given as Director’s salary or 2) Profits are distributed as dividend. The same question is amended solved in BPP Kit Page 179.
My doubt is why there is no NIC in the second option.
Is it because the entire profit is distributed as dividend and we have to assume that there is no director or employee in the company?There is no NIC as although there IS a director, the owner manager of the company, he / she is NOT paying themselves a salary but instead taking everything as a dividend and of course there is no NIC on dividends!
Thank you so much.
So if a company has zero salary director, there is no need to pay NIC either by the company or by the director who receives the same profit as dividend instead of salary.The director’s salary does not have to be zero for no NIC to be payable – the salary simply needs to be below the primary threshold below which NIC are not payable!
Yes agreed. Thanks once again.
So many fine points and threshold figures like 31,865 basic tax rate, 100K for PA, 7956 for NIC, 11,000 Annual exemption for capital gain, Class 1 and 1A and Class 4 NIC, 75000 value of house calculation, 325K Nil Band for IHT etc, 18% and 28% tax for capital gain, 18% and 8% capital allowance etc. etc. threshold dates for filing return, 1/400 factor for Marginal relief, 6,000 threshold for chattel with 5/3 rule, 20% and 21% tax for corporates, 40% IHT and 20% IHT for chargeable life time transfer, special calculation for premium paid on lease, F6 paper requires memorizing quite a lot of points.
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