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One way or another
Key points
- Recent tax changes have had a material effect on the tax costs of extracting cash from an owner managed company.
- Dividends were favoured over bonuses a few years ago but it is advisable now to make detailed comparative calculations to determine the most beneficial route to extract profits.
- It is often sensible to extract a judicious level of salary.
- Alphabet share arrangements are unlikely to offer material tax advantages nowadays.
- In certain situations paying a bonus may be a way of keeping a company outside the quarterly instalment payment regime for corporation tax.
For many years the vast majority of owner managers have been taking dividends to extract surplus profits from ‘their’ companies while also drawing a reasonable monthly salary. Many have also made further tax savings by passing some (ordinary) shares to their spouses and paying them appropriate dividends.
But we have recently...
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