As Accountants in West London we are often asked by business owners about tax efficiency. For instance, when extracting the profits from your company. And with the help from Harnett Accountants in Richmond you can minimise the tax and NI bill.
The Taxman prefers you to take all company profits in the form of a salary or bonus as these carry the highest NI charges and guarantees tax to be deducted under PAYE. We recommend that you pay yourself a smaller salary that is covered by your personal allowance and avoids your company/self paying NIC’s (£7,072 for 2011/12).
Any further amount extracted can be taken in the form of dividends. If the gross dividend is less than the basic rate of £35,000 you will pay no further income tax or NI charges on said income. However, larger dividend payments will create an additional tax charge of 25% (for 40% taxpayers) of the net dividend or 36.1% (for 50% taxpayers).
If you don’t need the income now, you can extract the profits in the form of employer pension contributions – however you will have to pay income tax on the pension when you eventually receive it. You can also charge rent for assets your company own and use, whether it’s real property (land) or intellectual property (patents). Additionally, if you lend funds to the company it can pay you a commercial rate of interest on that loan free of NI charges.
If you would like to know more on this subject then Harnett Accountants in West London offer a free, one hour, no-obligation consultation. And keep reading our daily blogs on all your helpful accountancy tips from your favourite accountants in Richmond.
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