Category: Family Business

Profit extraction in 2020/21 – What is the optimal salary?

A popular tax-efficient profit extraction strategy used by personal and family companies is to take a small salary and extract further profits as dividends. Where this approach is adopted, the starting point is to determine the optimal salary. While this will depend on personal circumstances and there is no excuse for not doing the sums,…


National Living Wage – Is your business ready for 1 April 2020?

From 1 April 2020, nearly three million workers are set to benefit from increases to the National Living Wage (NLW) and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission. From 1 April 2020, the NLW will rise from £8.21 per hour to £8.72 per hour. The new rates…


Utilising the 2019/20 dividend allowance

The dividend allowance is quite unusual in that it is available to everyone and everyone has the same allowance. For 2019/20 the allowance is set at £2,000. In common with many allowances, it is a case of use it or lose it. As the end of the 2019/20 tax year draws closer, what can be…


Family member pension contributions

Although there continues to be plenty of speculation over possible pension tax relief cuts, as things currently stand, paying into a pension generally remains a tax-efficient way of saving for old-age. Given that there may well be future changes in this area, it might be beneficial to consider starting, or topping up, pension plans sooner…


Optimising tax-free benefits in family companies

Making use of statutory exemptions for certain benefits-in-kind offers an opportunity to extract funds from a family company without triggering a tax charge. The essential point to note is that to make the tax saving, the benefit itself, rather than the funds with which to buy the benefit, must be provided. Mobiles No tax charge…


The dividend allowance explained

The dividend allowance, which was originally introduced from 6 April 2016, was cut from £5,000 a year to £2,000 from 6 April 2018. The cut is likely to have a significant impact on employees and directors of small businesses who receive both salary and dividend payments. Many family-owned companies allocate dividends towards the end of…