Top 7 Ways to Select a Book Topic That SellsWritten by Judy Cullins
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 10,000 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 as income is drawn from company by owners as dividends from their shares and amount of dividends drawn is restricted below 40% band rate (i.e. 31,063 for tax year 2002/03). That way, 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 within higher rate bracket of income tax (i.e. above 34,515), they will be taxed at 22.5% on excess, which of course will increase tax burden. The company profits are subject to corporation tax rates. Those are lower than income tax rates.
The most catastrophic scenario is when director takes his reward from 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, tax system treats companies as separate from their owners because a company is a separate legal entity. The problem is that 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 increase 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 on 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 on business profits within a specified band (7% on profits between 4,615and 30,420). 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 illustrate above, let's take a simple example. We have a limited company and a sole trader. They both make 60,000 profits each in tax year 2002/03. We assume that company director takes a salary equal to amount of his personal allowances (untaxed income) of 4,615 and balance as dividends. The company will pay corporation tax at 19% equal to 10,523 and nothing else. The sole trader will pay income tax 16,542, National insurance Class 2 104 and National insurance Class 4 1,806. Total 18,452. The bottom line is that person that has incorporated his business into a limited company will make a tax saving of 7,929 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 help 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 years Inland Revenue has tried to reclassify self-employed. The 1% in NIC hike on staff salaries above NIC threshold from next April adds to both employees' and employers' tax burden and may more than offset saving from corporation tax zero rate on first 10,000 of profits.
THE REAL THINGWritten by Arleen M. Kaptur
Writing - everyone does it, but not everyone is a writer. There are those who write letters, lists, journals, and are very good at it. Then there are those that scribble notes of all kinds to themselves, but never make use of them. They lose note that told them where note was that mentioned where original note was and what is was all about.
Then on other hand, you have someone who calls themselves a writer, and may have something published, but they are into marketing part of writing much more than content. Their mind and heart are geared to making money in writing world and giving publishers, e-zine owners and other media what they want to hear, not what this particular writer has to say.
Of course, we all want to make money at what we do - this is just being practical. How long could you survive if you didn't make any money and this was your only means of support?
What I am trying to say is that every true writer has a million ideas, stories, and articles in his heart and in his mind that are labeled and stamped as genuine and original. They are basically who this person is and what is important or of significant value to this writer.
When we ignore what is inside of us as writers, then we are belaboring entire process. Sure, you might make a living, but are you making yourself a life? Are you being true to your real self, or are you being molded by today's market interests or trying to attune yourself to only what tomorrow's market will bear. People read what they feel they SHOULD read, but not really.