Tx-Specimen Q32

Hi Jilly, Tx-Specimen Q32 Here in this case the tax levied will be based on base the personal tax rate Firstly, we should consider that the tax on dividend will be lesser than if on the tax on salary salary(remuneration) because for 37700 the tax on dividends is only 8.75% compared to 20% on salary Secondly, if self employed will pay class 2 and class 4 if incorporated will pay class 1 employee for remuneration? class 1 employer class 1 A as an employer all that is bigger tax than if self employed Can you please correct me and clarify more, Thanks, (b) Advise Sarah as to why her proposed basis of extracting profits from the new limited company is not optimum for tax purposes, and suggest how the mix of director's remuneration and dividends could therefore be improved. Answer: ( b ) (1)The relatively high tax cost of Sarah incorporating her business arises because of her salary attracting both employee and employer NICs. (2)Restricting the salary to around £9,000, and taking a correspondingly higher amount of dividends, would significantly reduce her overall tax cost