Test your understanding: answers
(1). Jocasta’s salary is not employment income but is merely part of her partnership profit share. Accordingly, in addition to paying income tax on her total income from the partnership, she will pay class 2 and class 4 national insurance contributions. She will not have to pay class 1 national insurance contributions.
(2). A company’s distributable profits are after the deduction of corporation tax. Accordingly, RFJ Ltd will have paid corporation tax on its profits. Due to the level of the company’s profits, corporation tax will have been paid at the small company rate. Rakel will then pay income tax at an effective rate of 25% on the dividend received 100/90 x (32.5% – 10%) = 25%).