Efficient profit extraction for 2019/20

As the end of the 2019/20 tax year approaches, now is the time to review your profit extraction strategy for 2019/20 to ensure that it is tax-efficient – and to pay additional bonuses or dividends if necessary.

Where the employment allowance is not available, it is generally tax efficient to pay a salary equal to £8,632 and to take any additional profits as dividends, assuming that the company has sufficient retained profits available. Where the employment allowance is available, it is tax efficient to take a salary equal to the personal allowance of £12,500 (assuming that this is not used elsewhere) before taking further profits as dividends.

Remember, all taxpayers are entitled to a dividend allowance and you can take advantage of this to pay dividends to family members who are shareholders. The dividend allowance is set at £2,000 for 2019/20. 

Contact one of our tax advisers to review your profit extraction strategy for 2019/20 before the end of the tax year.