Tax Tip of the Month – Profit Extraction
If business is going well then you should be making profits, which is great, but have you checked that you are taking these profits in the most tax efficient way?
Things you should be looking at are as follows:
- Taking dividends instead of a salary. The dividend tax rate is lower than the tax rate on earnings
- Making contributions to a pension scheme. Pension contributions are a tax allowable deduction for a company and are free of income tax and NI for the employee (up to certain limits)
- Taking tax efficient benefits. Some benefits can be provided free of tax, things such as childcare vouchers, mobile phones, bikes for work, company cars, training courses, gym membership, health screening, subscriptions and so on.
If these do not sound familiar to you then you should speak to your accountant before your tax is due.