Remuneration Planning

Many business owners traditionally choose a combination of a modest salary and dividends to draw income from their company. When structured effectively, this strategy can reduce both personal tax and National Insurance Contributions (NICs) on income.

However, any personal income tax savings should be weighed against the impact on the company’s Corporation Tax position. Unlike salaries and associated NICs – which are deductible for Corporation Tax purposes – dividends are not. This means that paying a salary can reduce the company’s Corporation Tax bill, whereas dividends cannot.

That’s why it’s important to take a holistic view – considering both the company’s and the business owner’s tax positions – when planning how to extract funds efficiently.

As part of this, it’s crucial to explore additional options to ensure that funds are extracted from your company in the most tax-efficient way.

These strategies can include:

Interest on a Director’s Loan Account: If you’ve lent money to your company, you can charge interest, which is a tax-deductible expense for the company.
Letting Property to the Company: Renting personally owned property (like office space) to the company can provide an income stream and potential tax advantages.
Pension Contributions: Employer contributions to pensions are deductible for the company and don’t attract NICs, making this a highly efficient extraction method.
Restructuring Shareholdings: Involving a spouse or family member can help utilise multiple tax-free allowances and lower tax bands.
Trivial Benefits: Providing low-value perks (under £50 per benefit) can offer tax-free value to directors without triggering a tax charge.

How can we help?

At Stratos, we work with you to assess your remuneration options each year and help identify tax planning opportunities that align with your personal and professional goals. Our tailored approach ensures you maximise tax efficiency while meeting both your business and financial objectives with confidence.

Why Stratos?

We take the time to understand your individual circumstances before advising on the different options and considerations when reviewing your remuneration and those of other director/shareholders. This ensures the process is handled as efficiently as possible, helping you maximise your personal income while giving you confidence that everything has been managed properly.