Written by Jennifer Johnson

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 100979 company byrepparttar 100980 owners as dividends from their shares andrepparttar 100981 amount of dividends drawn is restricted belowrepparttar 100982 40% band rate (i.e. œ31,063 for tax year 2002/03). That way,repparttar 100983 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 100984 higher rate bracket of income tax (i.e. above œ34,515), they will be taxed at 22.5% onrepparttar 100985 excess, which of course will increaserepparttar 100986 tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.

The most catastrophic scenario is whenrepparttar 100987 director takes his reward fromrepparttar 100988 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 100989 tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is thatrepparttar 100990 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 100991 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 100992 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 100993 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 100994 above, let's take a simple example. We have a limited company and a sole trader. They both make œ60,000 profits each inrepparttar 100995 tax year 2002/03. We assume thatrepparttar 100996 company director takes a salary equal torepparttar 100997 amount of his personal allowances (untaxed income) of œ4,615 andrepparttar 100998 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 100999 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 101000 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 101001 Inland Revenue has tried to reclassifyrepparttar 101002 self-employed. The 1% in NIC hike on staff salaries aboverepparttar 101003 NIC threshold from next April adds to bothrepparttar 101004 employees' and employers' tax burden and may more than offsetrepparttar 101005 saving fromrepparttar 101006 corporation tax zero rate onrepparttar 101007 first œ10,000 of profits.

Why You Should Be Writing Articles

Written by Ken Hill

Did you know that one ofrepparttar most effective ways to promote your business online is to write articles for publication in ezines?

It's true.

Writing articles can successfully drive tons of free targeted traffic to your website and is a technique that is used by many successful online marketers.

Why is writing articles such a powerful way to promote your business?

Because as opposed to paid advertising, an article is an ezine becauserepparttar 100978 ezine publisher believesrepparttar 100979 article writer has something important to say.

In essence,repparttar 100980 ezine publisher is saying that what you write in your article is important and that you are an expert at what you're talking about.

Because of this, writing articles can help you gain trust with your readers, brand you as an expert in your field and thereby dramatically increase your sales.

Why would an ezine publish your article?

Because publishing an ezine requires a lot of time, and a lot of work onrepparttar 100981 part ofrepparttar 100982 publisher.

Not only do ezine publishers strive to provide their readers with high quality content, but they are also responsible for allrepparttar 100983 day to day running of their ezines, as well as promoting their own businesses online.

Because of this, many ezine publishers just don't haverepparttar 100984 time to write articles for every issue of their publication.

Besides that, many ezine publishers just don't feel comfortable writing articles.

If you are able to write informative articles, then, you can provide ezine publishers with content that their subscribers will find useful while also promoting your own business for free atrepparttar 100985 same time through your resource box atrepparttar 100986 end of your article.

Your resource box is where you are able tell people who you are and provide a brief advertisement for your business.

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