As an owner of a business you have the option to structure your business according to your requirements. There is no one size fit all solution available and every individual needs to assess his or her circumstances to choose most operationally and financially feasible option. However, as a director shareholder (owner manager) of a company you have more opportunities than most to organise your income tax affairs efficiently.
The Starting Point?
- Start by estimating income that you don’t control directly e.g. rental income or dividend from investments.
The Variable Factors
After considering the above, decide the amount and type of drawings from your business.
- Make full use of your tax free personal allowance
- Don’t forget the entitlement to a full year’s NI credits which counts toward your state pension.
- To meet your needs, choose between the different sources of drawings available e.g. dividend, salary or pension etc.
- Don’t forget the tax free dividend allowance
- Beware of different tax band rates for dividends and other sources of income
Tax reliefs increase the amount of income you can receive tax free or how much of it is payable at basic rate tax (instead of higher rate)
Start by estimating how much your income will be, excluding that from your company, then tailor the amount of drawings from business to make best use of tax allowances and relief. Get in touch with a qualified accountant who should be able to advise on this.