Small business owner? Sick of constantly topping up the tax mans coffers? There are ways of extracting your profits tax efficiently.
The most obvious is using a pension. Whether or not you are a sole trader, partnership, LLP or Limited Company you get tax relief on any contributions to your pension. If a sole trader, partnership or LLP this is at your highest marginal rate meaning you could save up to 45%! Where you are limited your company makes an “employee contribution” and receives corporation tax relief (smaller companies rate is 20%).
Obviously the normal pension rules apply so getting your money back out is restricted in that you are restricted until at least age 55 and 25% is tax free with the remainder taxable income. Do the maths though and you will see how effective a strategy this can be!
A second simple solution may be to incorporate your business. Simply put if you are a sole trader, partnership or LLP you can apply to be a limited company. The savings come from paying no national insurance on profits and instead withdrawing your profits in the shape of income (within your personal allowance) plus dividends.
At Financial Fortress, many of our clients are successful business owners and we have many years of experience operating in this market. Our advisers will clearly explain your options and make clear recommendations going forward in order to achieve your objectives. We work with other experts including accountancy firms and solicitors and are happy to collaborate with your own or recommend local firms if needed.
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Registered office, 14 Horrocks Road, Chester, CH2 1HE. Company number: 9180267.