Sarah Bradford looks at profit extraction strategies for 2020/21 and the level of optimal salary.
With the 2020/21 tax year now underway, it is sensible to consider tax-efficient profit extraction strategies for those operating via personal and family companies.
This year, the primary and secondary Class 1 National Insurance contributions (NICs) thresholds are no longer aligned, and this adds a further complexity to the calculations. The increase in the National Insurance employment allowance may also have a bearing.
As in previous years, there is no ‘one size fits all’; the optimal profit extraction salary will depend on personal circumstances.
Key numbers
The personal allowance for 2020/21 remains at £12,500. For 2020/21, the basic rate of tax is 20%, applying to the first £37,500 of taxable income, the
