Taxation Essay Example | Topics and Well Written Essays - 1000 words - 9

Taxation - Essay Example his study will also perform examples of calculation to demonstrate the actual effects of the tax payments on individual and limited company, considering the aspects of Insurance, capital gains and inheritance. When Sally realizes capital gain from the investment through the exercise of the share option, the capital gain ought to form part of the taxable income. Taxation exempts many specified benefits under this condition, including insurance and the application of computer and technology. The tax system operates with exemptions of certain income elements from taxable income for individual investors, which in the case of limited company, there is minimal exemption or no exemption at all. Income sources including interest, house rent and dividends are added to the income of the spouse with the highest earned income. The personal income tax will be charged a flat rate of 15% of the income per month from the earnings gained from investment (Melville 2014, p32). If sally operates in cash, she will have two alternative decisions, either to declare the entire income from the investment, or part of it, or she may decide not to declare the income of personal income in the tax return. In the case of registering a limited company, there is no decision to make on the income to declare. All the income sources including taxable income, forms part of the taxable income. The UK system of calculating corporate taxes operates on the basis of a single tax rate applying to all the taxable incomes.  The rate is decided on by the amounts of total earnings. Registration of a limited company will enable Sally’s investment to attract smaller tax rates applied to the taxable incomes lower than the minimum limit. Investment earnings between $10000 and $37000 are exempt from taxation in the individual investment, but in the limited company, the corporate tax return must contain all income elements, charged a flat rate of 15% (Melville 2014, p27). However, the company is allowed to