Neil has been in business for many years preparing accounts to 5 April each year. His profits in a typical year (adjusted for tax purposes) are approximately £50,000 and his drawings are £3,000 per month (i.e. £36,000 per year). He has no other income and he is not a Scottish taxpayer.

Neil is now thinking of forming a company (wholly owned by himself) to run his business.

If this happens, he would extract £36,000 per year from the company, either as a director's salary or as a dividend.

Required:

(a) Calculate the total amount of income tax and National Insurance contributions payable each year at present, with Neil operating as a sole trader.

(b) Calculate the total amount of corporation tax, income tax and National Insurance contributions that would be payable each year if Neil decides to incorporate and takes a monthly director's salary of £3,000.

(c) Calculate the total amount of corporation tax, income tax and National Insurance contributions that would be payable each year if Neil incorporates and takes a dividend of £36,000 per year.

Assume that the annual profits of the business continue to be £50,000. Use tax rates and allowances for tax year 2020-21 and corporation tax year FY2020 in your calculations and work to the nearest £.