Simple Incorporation Calculator for 2011/12

There are many reasons why individuals in self employment or partnerships choose to incorporate their business but one cannot fail to notice the financial saving presented by incorporation.

Provided an individual is not caught by IR35 or other complex legislation then taking a low wage with dividends can result in an annual saving of £4,210 in the tax year 2011/12.

The table below illustrates how an income of £46,902 achieves a saving of £4,210 in three stages. Where there is scope to defer or reallocate income the annual financial saving can exceed this amount.

First £7,500   Fixed saving £88
Next £34,975 £90 per £1,000 £34,975 x 9% £3,148
Next £4,427 £220 per £1,000 £4,427 x 22% £974
Total £46,902   Total saving £4,210

Applying the three stage calculation enables one to demonstrate savings of £3,352 for on an individual earning £43,000, as follows:

First £7,500   Fixed saving £88
Next £34,975 £90 per £1,000 £34,975 x 9% £3,148
Next £525 £220 per £1,000 £525 x 22% £116
Total £43,000   Total saving £3,352

Multiple savings

Using the same three stage calculation one can show that a self employed individual with income of £17,750 would save £1,010 annually and three individuals earnings £14,000 each in partnership would save £2,020

Please beware that there are many varying complex issues to consider before incorporating.

copyright ©2011

This article is for discussion purposes only and does not represent advice on which you should act without consulting a professional as tax legislation is complex and changes frequently.

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