Profit Extraction

I am not a tax expert and this isn’t meant as tax advice .

I do believe business owners have a great opportunity to take out the profit in the most tax efficient way.

It’s the money you get to keep that matters and not what it’s called.

In the UK a business owner who has a limited company… has the opportunity to take out money in different ways… as salaries, various benefits including company cars but many more less obvious ways, pensions, dividends, interest on loans made to the business and rent for property used.

Each has its own tax consequences.

You need to get professional advice from an accountant or tax specialist. The bigger the profit, the more specialist advice will pay for itself many times over.

Similar logic applies if your business is not doing well. Or is at the start-up stage

It doesn’t make sense if you have other savings, to pay yourself a high salary, pay tax and national insurance or social costs and then put money back in to fund the business.

It’s much better to live off your savings and to stop the taxman taking his cut.

Because of all these different ways to take out profit, I want you to focus on the Profit you make before the owners profit extraction and make an assessment of how well the business is performing.

That way your thinking about your business and its development doesn’t get confused by tax policy changes.

Return to P1M2 What Is Profit

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