At Optimus Accounting, despite the recent changes to the taxation of dividends, we are still a fan of limited companies. Why? In many cases company owners can pay less tax.
Operating your business as a limited company instead of a sole trader or partnership can have a number of benefits, including a range of opportunities to save tax.
The headline rate of corporation tax for all companies is now 20% and will drop to 19% on 1 April 2017. Compare this to a sole trader who will currently pay tax at 40% on profits over £43,000.
Profit Extraction – many company owners draw a small salary from their company, and take the rest of their income as dividends. This can still be done in a tax efficient manner, often saving thousands of pounds when compared to the tax paid by a sole trader/partner.
Further Savings with Spouse/Partner – many company owners involve their spouse/partner in the business in some way e.g. shareholder or employee. This can be used to produce significant tax savings.
Less Tax on Profits Retained in the Company – if some profits are retained within the company (and possibly reinvested) the only tax paid is the 20% corporation tax highlighted above. Building the value of the company in this way, possibly with a view to a future sale, can again be extremely tax efficient.
Complete Control – unlike sole traders, who are taxed each year on all of their business profits, company owners and directors usually have a choice of how and when they draw money from the company. In this way they have complete control over their personal income tax bills and liabilities.
Our Company Formation Services include:
- Company formations (normally 48 hrs)
- Bank account opening (with fast track facility)
- Business consultancy services
- Business start-up advice
- Company annual returns
- Company secretarial
- Dealing with all Companies House enquiries
- Supporting applications for business loans
Finally why not ask us to give your new/existing company a taxation ‘health check’, including advice on profit extraction by way of dividends, salary and tax-efficient pension contributions.
Require more information?
If you would like more information or would like to speak to us direct then call us on 01289330311. Or if you would prefer, ask us a question online.