Year End Tax Review 2008 Contents New Year's resolutions Investment limits Borrowings and tax Family tax planning Mr and Mrs Give generously and save tax Jam today, or jam tomorrow? Tax payback - tax credits Bringing it back home Children's pensions? A matter of trust Children's savings? All change for gains Second homes Portfolio gains Capital ideas Tax-free perks Employee pensions and NIC Pension policies Employee cars and fuel Business tax Pay rise for the other half? Company or trade Two jobs = too much NIC Should VAT be flat? VAT and cash Inheritance tax One careful owner

Company or trade Since Gordon Brown increased NIC significantly in 2003, people have been trying to reduce the impact. One way open to sole traders and partnerships is to form a company and pay out dividends instead of salary - dividends are still not subject to NIC. This is a complex decision, which should not be taken on tax grounds alone - many other factors have to be taken into account. The rates of corporation tax for small companies are increasing from 19% (in 2006/07) to 22% (in 2009/10) to even up this advantage, and the Government has promised to review the situation to see if other measures are necessary. In the meantime, a sole trader making a profit of £55,225 in 2007/08 would have been able to keep about £39,150 after tax and NIC; someone running a small company with the same profit would have after tax income of about £43,000. The advantage is going down, but it's still there. Action Point! Have you considered incorporating your business?