Profit Extraction Planning

Tax legislation changes on an annual basis; in recent years there have been significant changes in the way dividends are taxed. The most common methods of drawing remuneration or profits from a limited company are:

  • Company or employer pension contributions
  • Salary
  • Dividends
  • Interest on Directors Loan Account

Depending on your personal circumstances, it may be tax efficient to draw out money using a combination some or all of these methods, and the exact mix may change from year to year.

Other factors in your personal circumstances can also play a key part in the tax efficiency of drawing funds from a limited company including:

  • Your other taxable income or business interests
  • Whether you have child and you or your partner claim child benefit which may be repayable if you have total relevant income above £50,000
  • Any person pension contributions you make
  • The withdrawal of your personal allowance where your total taxable income exceeds £100,000

With the change to making tax digital just around the corner, it remains to be seen how things will evolve but one certainty is that without proper planning you may fall foul of an increasingly complex tax regime.

Contact our Legal Sector Partner, Andy Poole on 07828 857830 or andy.poole@armstrongwatson.co.uk to discuss how we can help you.

What is it?

Bespoke tax efficient remuneration and profit extraction planning that is bespoke to the individual shareholder’s personal circumstances and needs.

Who is it for?

All shareholders within a company structure.

What are the benefits for you?

  1. Bespoke solution specific to your circumstances and needs
  2. Tax efficient profit extraction
  3. Clarity and understanding of how what you extract from the company impacts your personal situation and others within your firm

What do I have to do?

You will need to provide us with the following information:

  • details of the ownership structure of the business including a copy of any relevant shareholders agreement
  • details of any non-company taxable income and what has been drawn from the company in the current tax year
  • an estimate of what the balances are on any applicable director’s loan account; your share of distributable reserves; and the performance of the company in the current year.

What are the deliverables?

You will receive a bespoke communication on the options available and our conclusion, together with justifications for our recommendation.

What is the cost?

There are several pricing options available and we always confirm with you before commencing work what the basis for our fees will be. Commonly, this is undertaken either on an hourly rate or fixed fee basis. The benefit to you of a fixed fee is that it provides you with certainty.

How long will it take?

This work can be completed within approximately 8 weeks of confirming the engagement. Depending on your accounting period end, we usually schedule this work to take place between January and the end of March each year.