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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4952
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If I make £300,000 Profit, after all costs and VAT, as a

Customer Question

If I make £300,000 Profit, after all costs and VAT, as a Limited Company as its sole employee [director] then whats the best possible way to get that money out paying the least possible tax.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

As it stands this 300K will be subject to Corporation Tax (CT) at 20%.

This can be reduced by making contributions to a private pension scheme, 40K in 16/17 tax year. In certain cases you can go back three years to mop up unused contribution limits. Such contribution levels assume the you personally have made no contributions and these are allowable against CT thus you receive them tax free.

Otherwise you are caught by Benjamin Franklin's dictum that in life there are but two certainties, death and taxes. Whichever way you turn, paying your self wages or any other scheme you will be taxed either personally through Income Tax (IT) and NI, as a director you are an employee per se and must be remunerated through PAYE channels, or via the company through CT. Dividends are a dead duck for two reasons, they are not allowable against CT and are grossed up for tax in your hands although the first 5K are tax free. That gives you a tiny loophole personally.

I am so sorry to have to rain on your parade.

Customer: replied 1 year ago.
Could you give me a break down example of :
8k salary + Rest in dividends after tax etc.
Expert:  bigduckontax replied 1 year ago.

At an income level over 100K you loose your personal allowance so you would pay tax at 20% on the first 32K, 40% on the next 118K and 45% on the remainder. Total tax say 12.11 payable.

Customer: replied 1 year ago.
whats the total take home.
Expert:  bigduckontax replied 1 year ago.

My error, I am working in darkness as my wife is asleep!

121.1K is the tax due so the take home pay on 300K is 178.9K.