Choosing between formal employment and self-employment

Option 1: Employed by Main Street limited
Question 1a
Rebecca’s Property Income and expenditure 2019/20 as an employee
Rebecca -
cont.
Property income
W1 £ £ £ £
Property 1
Income 12
months @
575 6,900
Repairs 1,200
Insurance 340
1,540
44/52 1,303
(1,303)
5,597
Property 2 2,840
Income 4
months @
710
Insurance 290
Advertising 670
Loan
Interest 500 (1,460) 1,380
Property 3
Income
Premium 15,000
Rent 4,600 19,600
Expenses
Rent 6,800
Insurance 360 (7,160) 12,440
Property 4
9,000
Expenditure (1,140) 7,860
Total
Property
Income 27,277
Notes 1
Advertising, repair, and insurance costs relate to the time that the property was let out
and so can be claimed in full.

Question 1b
Calculate the total income tax payable by Rebecca for 2019-20
Tax
deducted
Non
savings Savings Dividend Total
£ £ £ £ £
Employment W2 84,325 84,325 36,500.00
Bank
interest 650
Dividends 8,250
Property W1 27,277 27,277
Gross
income 111,602 650 8,250 111,602 36,500.00
Personal
allowance W3 11,990 11,990
123,592 650 8,250 123,592
Taxed as: £
34,500 @ 20% 6,900.00
89,092 @40% 35,636.74
Non savings 123,592
Income
tax
liability 42,536.74
Savings 500 0 0.00
150 0.2 30.00
Dividends 2,000 0.0 0.00
6,250 0.08 468.75
Less: tax
paid (36,500.00)
Tax
payable 6,535.49
W2 £ £
Salary 67,000
Removal
expenses 14,000
Annual
bonus 7,750
Less
allowed
amount:
10,000 @
45p (4,500)

4,100 @
25p (1,025)
2,225
Golf club
Subscription 1,000
Loan 12
000×(4%-
1.5%)×4/12 100
84,325
W3
Total
income
exceeds
£100,000,
so personal
allowance
is abated.
£
PA 11,850
Less:
(107,415 -
100,000) / 2 (5,801)
6,049
Notes 2
PSA is £500 because Rebecca is a higher rate taxpayer.
The £2,000 dividend allowance is available to all taxpayers.
Question 1c
National Insurance Contribution Payable by Rebecca
£
Property 1 insurance 340
Property 2 insurance 290
Property 3 insurance 360
Property 4 insurance 1140
Total 2130
Question1d
National Insurance Contribution payable by Main Street Consultants Limited.
Monthly pay £ 5583.33

Insurance
5121.33 @ 13.8% × 9 months 6062.60
Option 2: Self employment
1. Calculate the total income tax payable by Rebecca for 2019-20, including the tax on the
property income in Question 1.
Tax
Non
savings Savings Dividend Total
deducte
d
£ £ £ £ £
Net profit 58,474 58,474
Bank
interest 650
Capital 27,000
Dividends 8,250
Property W2 27,277 27,277
Gross
income 112,751 650 8,250 85,751
Personal
allowance W3 11,990 11,990
124,741 650 8,250 97,741
Taxed as: £
34,500 @ 20% 6,900.00
90,241 @40% 36,096.34
Non
savings 124,741
Income
tax
liability
42,996.3
4
Savings 500 0 0.00
150 0.2 30.00
Dividends 2,000 0.0 0.00
6,250 0.08 468.75
Less: tax
paid 0.00
43,495.09
Annual
Capital
exemption 11,300
Total
Income
Tax
payable 32,195