Sarah Bradford explains how profits can be extracted from a family company as a salary or bonus and how to set the salary level.
Operating a business as a personal or family company is popular. However, if the profits are to be used personally by the directors and shareholders, they need to be extracted. There are various ways this can be done, some being more tax-efficient than others. Options include paying a salary or bonus, taking dividends, providing benefits-in-kind, and making pension contributions.
In this series of three articles, I examine the merits of different extraction methods, and the associated tax implications.
Arguably, the simplest and most obvious way to extract cash is for the company to pay a salary to its directors or shareholders, or perhaps a bonus at the end of the year (or both). Here, in part 1, I explore the implications of taking a salary or bonus, explain when this can be
