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Memorandum

Client: Maia

Subject:

Prepared By: Tax Senior

Date: 1 Jun 2023

Part (a):

Comparison of taxable income and income tax liability for year 23/24 and 24/25 is as follows:

23/24 24/25

Salary 25,200 25,200

Mobile Phone (exempt) - -

Home Cinema (1,700 * 20%) 320 320

Shares remuneration 1,800 -

Shares Value 2,100

Amount Paid (300)

Non-cash benefit 1,800

Dividend 420 420

Taxable Salary 27,740 25,940

Income Tax liability 12,570 * 0% / 12,570 * 0% 0 0

14,750 * 20% / 12,950 * 20% 2950 2590

420 * 0% / 420 * 0% 0 0

Class 1 NIC 12630 * 13.5% 1705 1705

Cashflow of Josh: 23/24 24/25

Salary 25,200 25,200

Dividend 420 420

Income tax Liability (2950) (2,590)

NIC (1705) (1705)

Payment for shares (300) -

Rent and living expenses (2,500 * 12) (30,000) (30,000)

Cash in hand (9,335) (8,675)

Class 1 employee NIC is payable on cash benefits. Mobile phones are an exempt benefit. Shares will be
considered as noncash benefit because they are in an unquoted company. Furthermore, home cinema is
also a noncash benefit. So, no NIC will be paid by Josh.

Josh requires additional cash of 7,906 in year 23/24 and 6,906 in year 24/25.

Difference in additional cash required in both years in due to extra non cash taxable benefits in the form
of shares and home cinema.