Potential optimal profit extraction strategies for tax years 18/19 and 19/20.

Updated: Dec 11, 2019


As the tax year 18/19 gives way to 19/20, let's briefly recap and explore the potential optimal profit extraction strategies pertaining to company owner-managers.

Potential available allowances:

Extraction:

Tips:

  • Review salary before the year-end to ensure is not more than the tax efficient limit.

  • Consider appointing your spouse or civil partner as director before the year-end to utilise (if

  • available) all of their Personal-allowances as salary.

  • Consider declaring an interim dividend before 05-April each year to make use of available allowance.

  • Charge interest to a loan made to your company to enable profit extraction, it's not earning, so it's exempt from NI, and deductible from CT if it does not exceed commercial rates.

  • If you are not an owner-manager, you can dispose of assets that trigger income gains to make the most of their income tax allowances.

  • Prepare up to date management accounts to ensure proposed dividend don't exceed available profit. i.e. ensure there are enough retained earnings to allow for dividend distribution.

  • To profit from the single-tier state pension, you need 35 qualifying years. Paying a salary of £702 or £719 per month will ensure you don't miss out.

  • If you are not an owner-managers; consider disposal of assets that trigger incomes gains to make use of your allowance.

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