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Basic brochure design in Two
You may already know some of the many different tips and
techniques on designing your brochures. Based from what you have
learned and followed, you might be thinking that you have the
perfect type of brochure for your business.
But do you...
Basic Web Site Design
General Impression
Your web site is like a window display of your business. If the
impression that it creates is not good enough visitors will
simply leave. Your site must be:
Neat Organized Attractive Professional
It is better if...
Choosing the correct keywords for a site
In this article, we focus on the correct way of finding out the keywords for which you should optimize your site for the search engines. This article will give you the formula for the Keyword Effectiveness Index (KEI) - a mathematical formula which...
Diabolical Design
© 2004, John Calder http://www.TheEzine.net You can find guides and tips on good web site design everywhere. In 1998, Vincent Flanders co-authored a book with a unique twist. It was called "Web Pages That Suck", and Mr. Flanders followed that with...
I’m Gettin’ Really Torqued!
For those of you who have been living in a cave for most of your lives, you can translate the “torqued” in the heading of this article to “mad” or “angry”. For today’s discussion of anger, let’s quantify the intensity of our focus with the words...
Using "Title Tags" With Your Web Links & Images
Using "Title Tags" for your web links & images is an arsenal many companies fail to utilize when planning out their web site optimization. These tags will help search engines to navigate through your information.In the last topic we...
Web Design - 7 Key things to avoid
A search for "web design" on Google returns more than 325 million results. So how do we start eliminating all these so called designers? Here are a few of the most common shortcomings. Watch out for: 1. Templates
2. Subdomains
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Website Design
When designing or redesigning a website the most important part of the project happens before any graphics or code are created.
Start by determining the primary goals of your website. Are you using it to sell your products or services? Maybe...
Why Stock Photography is a Great Resource for Web Business
A picture is worth a thousand words. And it still is today. With the media changing everyday photography has changed along with it and as a result is still a valuable resource for web business. Photos enhance the look of a website....
Your Website Survival Guide 2004
In the big, wide online world there are millions of websites and billions of webpages. In the increasing sprawl of this virtual jungle there must be an evolution. Some of these webpages must grow stronger and thrive whilst others will weaken and...
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GET SMART AND KEEP THOSE VISITORS!
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
as the income is drawn from the company by the owners as
dividends from their shares and the amount of dividends
drawn is restricted below the 40% band rate (i.e. œ31,063
for tax year 2002/03). That way, the 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 the higher rate bracket of income tax (i.e. above
œ34,515), they will be taxed at 22.5% on the excess, which
of course will increase the tax burden. The company profits
are subject to corporation tax rates. Those are lower than
income tax rates.
The most catastrophic scenario is when the director takes
his reward from the 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, the tax system treats
companies as separate from their owners because a company is
a separate legal entity. The problem is that the 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 the 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 the 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 the 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 illustrate the above, let's take a simple example. We
have a limited company and a sole trader. They both make
œ60,000 profits each in the tax year 2002/03. We assume that
the company director takes a salary equal to the amount of
his personal allowances (untaxed income) of œ4,615 and the
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 that the 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 help
the 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 the Inland Revenue has tried to reclassify the
self-employed. The 1% in NIC hike on staff salaries above
the NIC threshold from next April adds to both the
employees' and employers' tax burden and may more than
offset the saving from the corporation tax zero rate on the
first œ10,000 of profits.
Aren't there any other matters to consider in deciding
whether to incorporate or
not?
Higher administration costs to comply with company law,
payroll and bookkeeping is one factor. Another issue is
pension planning. Extracting profits out of the company as
dividends rather than salary means that there will be no
"net relevant earnings" and therefore pension contributions
can't be made. But the advent of stakeholder pension plans
has meant that contributions up to œ3,600 per year can be
made without the need for any earnings. If a person does not
wish to transfer funds in existing plans into stakeholder
because of high charges, there is a way out: the best net
relevant earnings (i.e. salary) in five consecutive years
can be used for making contributions for the next five
years, even if there were no salaries in the remainder four
years. It is comforting to know that entitlement to basic
state pension is not affected by taking a salary from the
company at the level of a person's personal allowances i.e.
œ4,615.
Furthermore, an individual may decide not to bother with
pension plans and instead invest in ISA. Often, these can be
more efficient than pensions but that's beside the scope of
this article. If that option is taken, no salary is
necessary.
Another factor is business motoring. It might be tax
advantageous for an unincorporated business that owns many
cars not to incorporate because if these cars have some
private use there will be benefits in kind taxed on the
users. These are generally higher than the straight
apportionment between private and business for all car
running costs in the case of sole traders.
The conclusion is that there can be considerable tax savings
waiting the sole trader who decides to go down the
road to incorporation. But, one needs to proceed with
caution and careful planning. And don't forget the biggest
advantage of incorporation, which is Protection
from Personal Liability. Incorporating is one of the best
ways to protect a business owner from personal liability.
Shareholders of a company are generally not liable for the
obligations of the company. Creditors of a company may seek
payment from its assets, but not the assets of the
shareholders. This means that business owners may engage in
business without risking their homes or other personal
property.
Thank you for taking the time to read this Article. I hope
you've found it useful. If you have, please drop me an email
and let me know what you think.
You can email me at...
constantinesavva@accamail.com
Alternatively, you can visit our website at
http://www.tax-accounting-london.info and read a series of
other full length articles that present the complete picture
on a variety of interesting topics.
If you would like to know how to save tax and make sure that
more of your hard earned cash stays with you to expand your
business and increase your profits, we have a Free Special
Report addressed to small businesses either starting up or
already in business. This Exclusive Free Special Report is
available automatically when you subscribe to our regular
series of Free Newsletters on finance advice and tax
planning by visiting our subscription area on our website
www.tax-accounting- london.info. It is complied from real
life situations dealing with small business tax affairs for
over 10 years and it is loaded with down-to-earth advice and
practical, understandable examples.
LEGAL NOTICE
Whilst every care has been taken in the preparation of this
article, the author cannot accept responsibility for any
errors or omissions. Proper professional advice should be
taken at all times.
We retain copyright for the contents of this article. Any
unauthorized copying or onward distributions are prohibited
without our consent.
About the Author
Jennifer Johnson is the owner of Logo Design Zone. She can create
a 100% unique, totally memorable logo for your business - for
UNDER $200! Does your current logo make the grade? Take Logo
Design Zone's free logo quiz and find out!
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