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Choosing the right options

Deciding how much income to take from your business as dividends and how much as salary is only one small part of maximising your tax efficient income.

Choosing the right options

Tax efficient income for business owners

As a shareholder in your company, you can choose how much of your income to take as dividends and how much as salary to make the most of available tax rates and reliefs.

Changes to the dividend tax regime which took effect on 6 April 2016, need to be considered as part of your dividend planning. A tax free allowance has replaced the dividend tax credit and new dividend tax rates now apply which could mean an increase of up to 7.5% tax on your dividend payments. The tax free allowance will be reduced in the 2018/19 tax year, so this needs to be factored into your income planning.

Other, often less well known, options are also available to improve your overall remuneration.

Our specialist advisers will come up with the best solution for you, in your particular circumstances as tax efficiency is never the only consideration.

What’s best for you?

You can extract cash from your business using a range of tax efficient options so your overall remuneration package could include:

  • Salary
  • Bonus
  • Dividends
  • Rent
  • Loans and interest on loans
  • Company cars
  • Mileage claims
  • Family tax planning
  • Payments into your company pension fund
  • Royalties and licence fees

What’s best for you will depend on your lifestyle needs, personal goals and your commercial situation.

How WMT can help:

Create a detailed review of each shareholder’s remuneration including all sources of income.

Review salary and dividend planning to ensure you are using the most tax efficient thresholds.

Ensure your dividend policy complies with company law.

Review the impact of new regulations on your corporation tax, shareholders’ personal tax liabilities, life policies and pension arrangements.

To make the most out of your tax situation, we can review your remuneration strategy in the light of planning for capital gains tax, inheritance tax and trusts as well as the preparation of your personal tax return.

Get in touch with our tax team to find out more about how we can help you.

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