Tax Planning Idea!

Tax Planning Idea!

Tax efficient cash extraction for business owners

With Income Tax and National Insurance rates as high as 47% combined, it is important to regularly review the most tax efficient way for business owners to be remunerated. There are several ways to extract value from a business, including salary, bonus, dividends, benefits, rent, interest and pension contributions. Each suffer different combined effective tax rates as illustrated below*:

 

 

Basic Rate Taxpayer % 

Higher Rate Taxpayer %  Additional Rate Taxpayer % 
Salary / Bonus  40.2 49.0 53.4
 Dividends 25.1 45.3 49.9
 Rents received 20 40 45
 Interest 20 40 45
 Self-employed income             29 42 47

  Pension contributions                                                                             0 for all

  Personal investment company income                                       0 for all

 

A review should be undertaken to the most tax efficient mix of these income sources considering that tax rates can change from year to year.

* The above rates are illustrative only and can change dependent on individual circumstances so shouldn’t be relied on without bespoke advice being sought.

As always, the key to successful tax planning is to seek advice as early as possible.

If you would like more information or would like to discuss your tax affairs in more detail please don't hesitate to contact our Tax Partners, Steve Crompton or Lucy Williams on the details below:

 

Steve Crompton

Partner – Head of Tax

direct dial: 01942 292541

mobile: 07790 840394

email: steve.crompton@jsllp.co.uk


Lucy Williams

Tax Partner

direct dial: 01942 292543

mobile: 07807 053494

email: lucy.williams@jsllp.co.uk

 

 

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