The March instalment of 'Any Answers Answered', featuring TAXtv hosts Giles Mooney and Tim Good, features two tax questions on SMP and the dividend allowance.
The first Any Answers question came from SteLacca and relates to small employers' relief and whether or not they qualify as a small employer in terms of National Insurance contributions (NICs).
Mooney explained that small employers' relief relates to statutory maternity pay (SMP), and in developing the answer, Good revealed how SMP works, how timing is important and how small employers can recover 103% from payments.
To qualify, small businesses should be paying £45,000 or less of Class 1 NIC. However, the question asks whether or not the £3,000 employment allowance deduction should be included in that figure.
In this example he has a client who has dividend income of £5,000, but no other income at all. In the same year they make a disposal resulting in a capital gain of £130,000.
The query here is what to include in the £5,000 - do they have to pay tax on it, and is it included in the personal allowance?
Tim Good runs through the full calculation in the video below.
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