Our latest Active Practice update provides limited company directors advice on extracting profit to avoid paying more tax than you need to
Believe it or not, there are more than 4.7 million limited companies registered in the UK, including the 810,316 incorporations that signed up in 2020/21.
Once you’ve set up an incorporated business and become a director, you have to be smart about how you extract profit to avoid paying more tax than you need to.
There are three main routes for a director to extract profits from their own limited company – salary, dividends and pension contributions. Usually, combining these three methods is the most tax-efficient approach to minimise your tax bill.
With corporation tax applying (at 19% in 2021/22) on any of your company’s taxable profits from its accounting period, the money you take out of the profits to pay yourself can potentially reduce your company’s corporation tax liability.
January 2022 Active Practice Update: How To Extract Profits Out of Your Company
If you would like to discuss in more detail any of the issues raised in this article with a member of our team, please call 01772 741200