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Following the new tax year, there are new updates to allowances and taxes as shared by the UK government. As directors and business owners, it’s important for us to keep abreast with these figures - such that planning our taxes and managing our company finances becomes easier.
In the second part of our blog post, let’s take a look at efficient ways to maximise profit-extraction for your
There are several 'cliff edges' where an individual's gross income exceeds a certain level and the marginal tax rates are disproportionately high.
Here are ways you can avoid higher marginal rate tax:
You can make full use of your personal allowances of your spouse or civil partner, which includes a share of £2,000 in dividends. For an automatic equal split of income between spouses or civil partners for tax, it’s best to put property into joint names with them.
To split income from any property other than 50:50, then ensure it is in joint names as tenants in common. Here, you can also prepare a declaration of trust confirming the split of income.
If a director is in danger of falling into a higher marginal tax rate, you can forgo dividends for a month or two and live off a temporary loan provided by the company.
Here are some general planning points should you decide to take up a director’s loan:
It can be beneficial for a limited liability partnership (LLP) to be set up alongside a company and run in a service role.
We hope this was a useful guide in helping you learn more about different ways you can maximise extracting your profits, as well as planning your taxes as a director.
If you need further help, don’t hesitate to reach out to us - Right Accounts professional and affordable tax-filing services for all individuals alike.
You can contact us here.
IMPORTANT: If you receive texts, calls or emails claiming to be from HMRC, offering financial help or a tax refund and asking you to click on a link or to give personal information, it is a scam. You should email it to [email protected] and then delete it.
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