Following legislative changes in recent years, the most tax-efficient way to extract profit from a business has become increasingly complex. πŸ“œ

Here are just some of the factors to consider:

– Distributable Profits
– Number of shareholders
– How much to extract from the company / how much to leave in
– Corporation tax position of the company
– Individual tax positions
– Individual National Insurance positions
– Personal pension positions

πŸ”Ή For smaller extraction amounts, a mix of salary and dividends is often the most tax-efficient.
πŸ”Ή As the extraction amount increases, the gap narrows, and for very large extractions, payroll tends to be become the best solution.

Each situation is unique though and requires separate considerations.

πŸ’‘ Pension contributions should also be on your radar. Employer pension contributions, in particular, can be a highly tax-efficient way to extract profit subject to annual allowances. They are:

– Typically deductible for corporation tax purposes
– Free of both PAYE and NIC, subject to annual allowances

Want to know more? Contact us today! πŸ“©

Pin It on Pinterest