Accessing your company profits
Constantly changing tax rules
When business owner-managers take profits from their business, it isn’t surprising that they want to do so in the most efficient manner. There are various ways to do this that can minimise both tax and national insurance contributions (NICs). Of course, tax is not the only issue. You will almost certainly need to draw a basic level of income to cover your personal requirements, regardless of the tax cost, and it will also be necessary to retain sufficient profits in the company to cover its future needs.
The Covid-19 crisis has altered the landscape significantly for individuals and business owners alike. The government announced a number of schemes which you may be taking advantage of to get through the crisis, including the Coronavirus Job Retention Scheme.
Even for those whose businesses have not stalled, the tax rules are still changing. Just because you have drawn profits in one way in the past does not mean that this continues to be the best approach. Company tax rates have fallen considerably in recent years, but the trend is set to reverse. The March 2021 Budget proposed that corporate tax for companies with profits in excess of £50,000 should rise to a maximum of 25% from April 2023. The taxation of dividends has become more punitive, with significant increases to the rates of tax on dividends and the abolition of the dividend tax credit. There may be environmental-related tax changes in the near future. These should be assessed carefully and monitored regularly for impacts on your business.