Corporation tax rate
Profits of the company are taxed at 20%.
National Insurance
The rate of employees’ NIC is 12%. That is applied to all the earnings between the lower and upper earnings limits (Between £8,060 and £43,000 for 2016/17). In addition, a 2% charge applies to all earnings over the NIC upper earnings limit (£43,000 for 2016/17). For 2016/17 the rate of NIC for the self-employed is 9% for profits between £8,060 and £43,000, and 2% on profits above £43,000.
It is possible to avoid all the NI contributions by incorporating your business. You will be able to take a small salary up to the threshold at which NI is payable, and then taking the rest of post-tax profits as dividends.
Pension
It is possible for the company to make pension contributions on behalf of directors/employees (subject to limits) to a registered fund. This is irrespective of the salary level, but provided it is justifiable under the wholly and exclusively rule. These contributions are allowable expense for companies, but they are deemed to be a private expense for sole traders or partners.
If your business is in Bromley, Kent and London areas, please contact us at Adiva Accountant in Bromley about the tax, national insurance and pension implications of trading as a company.