Rewarding yourself for the success of your business.
The opportunity for tax efficient access to the profits of your business depends on the type of business you operate.
For sole trades and partnerships, the profits of the business (or share thereof) are treated as the profits of the individual and so are charged to income tax and National Insurance Contributions (NICs) as they arise. Although the owner can then access the profits as they wish, with no further tax charge, there is little opportunity for tax planning.
The use of a limited company offers additional tax planning opportunities. This is because the company is a separate legal entity that is subject to corporation tax on its profits. The extraction of these profits, usually as payment of a salary or of dividends, is then taxable for the recipient.
Whilst the overall tax payable is broadly similar, this final profit extraction can be controlled and delayed so as to be made at the most favourable time.
Tax Innovations can help you to determine the tax efficient profit extraction strategy based on your income requirements and the profitability of the business.
If you would like to discuss tax efficient profit extraction strategies, please email email@example.com or call us on 01962 856 990.