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and NICs of £282). The tax payable on dividends is the same wherever you are in the UK so the net income would be increased by 10%.
Remember that dividends are usually payable to
all shareholders and are not earnings for pension contributions and certain other purposes. Finally, you need to consider with us the effect of regular dividend payments on the valuation of shares in your company.
National insurance
contributions (NICs)
Leaving profits in the company may be tax-efficient, but you will of course need money to live on, so
you should consider the best ways to extract profits from your business.
A salary will meet most of your needs, but you should not overlook the use of benefits, which could save income tax and could also result in a lower NIC liability.
Four key NIC points to consider:
1. Increasing the amount the employer contributes to company pension schemes. Care should be taken however as there are limits on the amount of pension contributions an individual can make both annually and over their lifetime.
2. Share incentive plans (shares bought out of pre-tax and pre-NIC income).
3. For some companies, disincorporation and instead operating as a sole trader or partnership may be beneficial.
4. Paying dividends instead of bonuses to owner- directors.
Planning for the year end
Tax and financial planning should be undertaken before the end of your business year, rather than left until the end of the tax or financial year. Some of the issues to consider include:
• the impact that accelerating expenditure into the current financial year, or deferring it into the next, might have on your tax position and financial results
• making additional pension contributions or reviewing your pension arrangements
• how you might take profits from your business at the smallest tax cost, and how the timing of payment of dividends and bonuses can reduce or defer tax.
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