The importance of Tax planning for Shareholders
Paying Tax is something you are likely to see as a necessary (but not hugely enjoyable) part of running your business. But are you doing enough to plan your own personal Tax liabilities?
As a Shareholder, you will pay your income Tax annually on a self-assessment basis. But there are plenty of ways to make this a less costly and onerous task to complete.
Planning ahead when it comes to Tax
By taking a forward-looking approach to your own personal finances, and working with an experienced Advisor, you can start to minimise your Tax costs and maximise the value you enjoy from your own earnings and company profits.
Working closely with us helps you:
- Know your future Tax liabilities – by looking at factors like expected dividend payments, pension provision and additional income to determine what you will owe.
- Set up an annual Tax plan – with provision for when payments should be made and when to set aside the funds needed to pay your income Tax bill.
- Make use of any Tax reliefs – so you can claim the relevant reliefs and Tax initiatives that are available, to bring down the amount of your overall Tax bill
- Maximise your earnings – by taking your earnings in the most efficient ways and managing your own personal wealth in a proactive manner.
Talk to us about your personal Tax planning
If you are a Shareholder looking to achieve the best results from your earnings, come and talk to us. We can review your Tax situation, create a robust Tax plan, and make sure you are getting the maximum value from your business earnings,
Dividends and paying yourself as a Director
Want to achieve the best results from your earnings as a Director?
As the Director in a limited company, dividend payments are the usual way for you to take money out of the company – and see a financial return on your investment into the company.
Dividends are payments made to the company’s shareholders when the business has made a profit. What is not re-invested into the company can be paid out as dividend payments to your Shareholders, of which you are one. But what’s the most effective way to do this?
Dividends as a part of good wealth management
As a company Director, the company’s finances aren’t your only concern – you also have to make sure you’re managing your own personal finances in the best way possible.
Good wealth management is essential as a Director, and that means taking an informed, long-term look at the ways in which you are paid, the financial vehicles you are using and the tax planning you are carrying out across the year.
To make your personal finances work effectively:
- Split your finances into business and personal wealth – it’s vital to create a clear divide between business cash (money in your limited company’s bank account) and your own personal cash (money in your personal current account and investments). Any profit you create is not ‘your money’ until it’s paid to you by the business.
- Ensure you’re being tax efficient – Once a dividend is paid to you – and that money is now yours – you’ll be liable to pay income tax on that income. The rates of income tax in most territories will be higher than the rate of corporation tax. So it’s usually a good idea to keep your profits in the business for as long as possible, minimising the amount of income you’ll have to pay when you file your annual personal tax return.
- Pay your dividends at the right time – the timing of WHEN you pay a dividend is important. If you pay a large dividend at the end of the tax year, it may take you over your tax allowance for the year. And if your total dividend income is too big, you could end up paying more higher-rate tax than you need to.
- Look at other ways to be paid – dividends are not your only option when it comes to getting paid as a director. You could put yourself on the payroll and take a small ‘living wage’. Or you could have your profits paid out as pension contributions into a personal pension scheme. So it’s sensible to consider all the tax-efficient alternatives.
Planning your directors’ pay
If you want to get the most from directors’ pay, come and talk to us. As your trusted business advisor, we will work with you to maximise your earnings. This includes helping you forecast your earnings and profits, planning out your dividend payments from the company and setting up your finances so you are being as tax efficient as possible.