The table shows the cost the company needs to incur to put £100 in the employee’s pocket, after all tax and NIC liabilities have been met. The tax rates used are those in force for 2003/2004.
Employee basic rate taxpayer
Employee
higher rate taxpayer
Wage/Bonus
Dividend
Wage/Bonus
Dividend
Small Co (19%)
£136.60
£100.00
£186.80
£133.40
Taper (32.75%)
£113.40
£100.00
£155.10
£133.40
Full (30%)
£118.10
£100.00
£161.40
£133.40
Notes:
The basic rate employee is assumed to be already receiving enough wages to bring
him above the £89 a week lower earnings limit. The higher rate employee
is assumed to be receiving enough wages to put him above the £595 a week upper
earnings limit. The results shown in the table are normalised at the “net of
corporation tax” level. The cost of dividends is therefore independent of
corporation tax rates, while the cost of wages/bonuses is calculated to include
additional savings in corporation tax.
