Following legislative changes in recent years, the most tax-efficient way to extract profit from a business has become increasingly complex. 📜
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
🔹 For smaller extraction amounts, a mix of salary and dividends is often the most tax-efficient.
🔹 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.
💡 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! 📩