Home Office Stress Busters

Written by BB Lee

According to a new survey carried out by Alliance & where ID_NUM=9270; Leicester, one in five small business owners view tax as their greatest concern. The Chancellor has announced in his last budget that companies with profits below œ10,000 will not have to pay any corporation tax with effect from 1 April 2002. The question to be asked is: does that announcement make incorporation a more attractive option compared to being a sole trader?

The answer is that from a tax point of view, it is advantageous to trade through a limited company as long asrepparttar income is drawn fromrepparttar 117545 company byrepparttar 117546 owners as dividends from their shares andrepparttar 117547 amount of dividends drawn is restricted belowrepparttar 117548 40% band rate (i.e. œ31,063 for tax year 2002/03). That way,repparttar 117549 owners have no further personal tax ("income tax") to pay. Moreover, dividends are not subject to national insurance contributions. This is excellent news of course. But, if dividend income falls withinrepparttar 117550 higher rate bracket of income tax (i.e. above œ34,515), they will be taxed at 22.5% onrepparttar 117551 excess, which of course will increaserepparttar 117552 tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.

The most catastrophic scenario is whenrepparttar 117553 director takes his reward fromrepparttar 117554 company as salary. Then his/her salary is taxed at income tax rates (like a sole trader's income). That is because, unlike sole traders,repparttar 117555 tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is thatrepparttar 117556 income taxes are higher than corporation tax rates. On top of that, they will be subject to employee and employer national insurance contributions, which of course increaserepparttar 117557 tax burden and render his position worse than even an unincorporated business ("sole trader"), because NIC Class 1 on payroll are higher than NIC Class 2 paid by self employed.

In contrast, a self employed person ("sole trader") is taxed at income tax rates onrepparttar 117558 profits from his business, which are added to his other sources of income. As it has already been mentioned, income tax rates are overall higher than corporation tax rates. On top of income tax, national insurance contributions class 4 are payable onrepparttar 117559 business profits within a specified band (7% on profits between œ4,615and œ30,420). National insurance contributions Class 2 are also paid by self-employed people, although those are lower than those payable by company directors on their salaries.

To illustraterepparttar 117560 above, let's take a simple example. We have a limited company and a sole trader. They both make œ60,000 profits each inrepparttar 117561 tax year 2002/03. We assume thatrepparttar 117562 company director takes a salary equal torepparttar 117563 amount of his personal allowances (untaxed income) of œ4,615 andrepparttar 117564 balance as dividends. The company will pay corporation tax at 19% equal to œ10,523 and nothing else. The sole trader will pay income tax œ16,542, National insurance Class 2 œ104 and National insurance Class 4 œ1,806. Total œ18,452. The bottom line is thatrepparttar 117565 person that has incorporated his business into a limited company will make a tax saving of œ7,929 compared to a sole trader! Isn't that fantastic?

Somebody might be wondering: why is this entire happening? The official explanation is that, this government, to helprepparttar 117566 economy grow, encourages people to leave as much profits within their businesses to be reinvested, instead of being taken out and spent.

The "unofficial line" is that, as a matter of fact, for yearsrepparttar 117567 Inland Revenue has tried to reclassifyrepparttar 117568 self-employed. The 1% in NIC hike on staff salaries aboverepparttar 117569 NIC threshold from next April adds to bothrepparttar 117570 employees' and employers' tax burden and may more than offsetrepparttar 117571 saving fromrepparttar 117572 corporation tax zero rate onrepparttar 117573 first œ10,000 of profits.

Is Working From Home Really For You?

Written by Joe Bingham

Forgetrepparttar hype! No, NOT everyone can make big money working from home.

Is it possible to make a six figure income working from home?


Is it possible to enjoy more freedom in your schedule, own your own business, fire your boss, and all ofrepparttar 117544 other work from home fantasies?


Can you do it?

Well, now that one's not as easy to answer. I can't solve that riddle for you. I CAN, however, let you know what working from home really involves so you can make that decision for yourself.


In some respects, working under a supervisor is a life of ease. You have certain responsibilities, and you take care of them, but that's as far as it goes. Working your own business is NOTHING like that. Allrepparttar 117545 decisions are yours to make, allrepparttar 117546 work is yours to do, and allrepparttar 117547 success and profit OR mistakes and failures will be yours as well.

Working your own business not only requires a change in what you are doing, but in how you think. No longer willrepparttar 117548 luxury of 'letting someone else handle it' be around. You have to step up your level of responsibility if you want to succeed.


Sure, everyone desires more money, a better house, more time off, a nicer car, and all that. However, there is a BIG difference between sitting onrepparttar 117549 couch saying, "I wish I had a car like that," and havingrepparttar 117550 desire to takerepparttar 117551 ACTION necessary to earnrepparttar 117552 money forrepparttar 117553 car of your dreams.

There is work that will need to be done. It's NOT going to just happen upon a wish. The kind of desire it takes to make it while working from home is a constant ACTIVE desire, not just a passive want.


Working from home will bring about new challenges for you. It takes courage to step up and meet those challenges. Each stage as you progress will require you to learn new skills, face different obstacles, and completerepparttar 117554 necessary tasks at hand.

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