As a company director, the obvious means of extracting profit from your business are to pay yourself a salary or take dividends. However, both of these methods attract tax which can be significant depending on the amount you are withdrawing.
A more tax-efficient way to take money from your business is to make pension contributions. The amount your business pays towards your pension is deductible against corporation tax, resulting in immediate tax relief.
Other tax-incentivised routes to consider, especially when you have maximised your pension savings or are near or over your lifetime allowance, are to invest in an Enterprise Investment Scheme (EIS) or a Venture Capital Trust (VCT). The tax reliefs afforded to investors in EIS or VCT companies mean you could save a considerable amount of tax by investing in these schemes. However, EIS and VCT investments are complex, high risk and not always suitable for your circumstances, so seeking professional advice is very important.
Often, a mix of different ways of extracting profit will yield the best financial results. We can assess your options and advise on the best strategy for your circumstances, balancing risk while maximising growth opportunities.
Selling your business is probably one of the most significant financial decisions you will ever make, so preparing for it is essential. Whether you are planning to sell or have already sold, we can help you to protect and grow the proceeds of your business sale. When preparing for exit, it is essential to consider how you will deal with the proceeds of your business sale in order to minimise the tax payable.
It is also worth considering other tax-efficient mechanisms that can be put in place before selling which can improve your overall return. For example, if your business owns its premises, this could be put into a pension and leased back to the company. This arrangement can be tax efficient and secures a source of income for your retirement.
Post-sale, you will want to structure your assets in a way that protects and grows your wealth. As wealth management experts, we can advise on and implement a strategy based on your objectives, risk appetite and inheritance plans. Since selling a business is a complex process involving several different professional advisers, we take a collaborative approach and will work with your team to achieve the best outcome.
Whether your exit from the business is a distant vision or an imminent plan, please get in touch for an initial discussion.
Without a doubt, owning and running a business is hard work but if all goes to plan your efforts will be rewarded with a healthy profit for you to take. However, drawing profit can incur significant tax costs therefore a tax-efficient strategy is necessary to maximise your return.
We can advise on ongoing tax-efficient strategies and work with your other professional advisers to maximise the financial return you get from your business, both now and when you come to sell.
The information contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.
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