Uk Income Tax, NI, Corporation Tax and Dividends

Posted by PlusNet on September 27, 2009, 12:46 pm

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Could anyone help me understand the Uk tax framework in a little more
clearly.

I've just setup a private limited company. I will have three sources of
"income"; a Salary from the company, dividends drawn from the company profit
and interest on some savings.

This is my understanding so far;
- I will pay "Income Tax" on the Salary and Savings interest, but;
- I will not pay Income Tax on the first ~£6.3k ("Personal
Allowance" combined Salary and Savings interest) BUT will pay 10% tax
specifically on the Savings interest if the combined salary and savings is
less than ~£2.4k
- Income tax will be 20% of the combined Salary and Savings interest
between ~£6.4k to ~£40k
- A further tax of 40% will be levied on any combined Salary and
Savings interest above ~£40k

- I will pay National Insurance on the Salary (but not the Savings
interest), at the following rate;
- nothing, if the Salary (excluding savings interest) is <£5k
otherwise a fixed annual payment of £2.40 if the Salary (excl savings
interest) is <~£5.7k
- if the Salary is >£5.7k, then NI is 8% of Salary (not levied
against Savings interest)
- if the Salary is >£43.8k, then an additional levy of 1% is payable
on the amounts over the £43.8k

Corporation Tax is applied to Net Company Profits (less any Expenses and
Charges on Income... more later...) at 21%

Dividends can be taken as income from whatever Profit is left after
Corporation Tax, and are subject to the following tax
- if Total Income (in my case Salary plus Savings interest) <~£37k,
Dividends are taxed at 10%. Otherwise, a rate of 32.5% is applied to any
Dividends above this threshold
- Tax relief of 10% is given on the first ~£6.4k of Dividends (excl
Salary and Savings)

This is what I've gleaned from HMRC and a number of sites, but I'm not sure
I've quite got it right?

Coming back to Corporation Tax, can anyone point me in the direction of
information which makes it clear what expenses I can and cant claim tax
releif on? I have the HMRC "480" PDF but I find it impenetrable.

Many thanks
Mark

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