Joe Brough looks at the options available for owner-managers to maximise the extraction of profits from their company in a tax-efficient way.
One of the benefits of trading via a limited company is that the owner has the freedom to determine the timing of when and how to remunerate themselves, a luxury not afforded to unincorporated traders, who are broadly taxed on trading profits as they accrue (or alternatively on a cash basis).
Getting the balance right
In terms of the mix of salary and dividends that should be taken, the general wisdom for 2024/25 is for an owner-manager to take a salary of £12,570, with the remainder as dividends. At this level, assuming that the full personal allowance is available, no income tax or employee’s National Insurance contributions (NICs) is payable, whilst gaining a year’s NICs credits towards their state pension
