The example figures on the right are given purely as a guide to show you how the calculation works. Any benefits paid or received by your business from clients . The gross salary paid to you by your business together with the associated Employers' NI . The final Schedule E tax you will pay will be calculated by adding the Deemed Payment to your total salaried earnings from the Intermediary for the year ending 5 April 2001 by applying the normal payroll taxation rules. Total tax payable on 19 April 2001 .
People are often surprised at the size of the final tax bill in the given example.
It must be emphasised that when you work out your IR35 tax position, it is may be that no further charges to tax exist at all. The example given is, however, fairly typical of many consultants who in the past would have paid themselves a very low monthly salary and taken the profits out of their company via dividends that would not be subject to National Insurance. It was to counter this practice that the IR35 regulations were introduced in the first place. The higher salary does not of course reduce the overall amount of tax payable by the 19 April 2000. It merely spreads the charge over the year as the tax is collected on the higher monthly salary as part of the normal payroll operation.