Finding the key to tax efficiency for company directors’ incomes

One of the central decisions for UK directors is how to structure their income tax efficiently.

Individual directors who have the key to unlock such tax efficiencies can choose how they are remunerated, how and when to extract from profits to do so and what combination of payment tools they use to legally minimise their tax liability while ensuring compliance with tax laws.

For example…

• Salary
• Benefits in kind
• Dividends
• Pension contributions
• Rent or royalties for use of personally held assets

Deploying a permutation of these and others, directors of owned companies in the UK can arrive at various tax strategies to minimise those tax liabilities and make the most of their financial resources. But what is the best for you and your company to maximise tax efficiency and achieve the optimal balance?

Historically, drawing a combination of a small salary and dividends was regarded as one of the most tax-efficient. However, rules changed and there are a number of factors which also now need to be considered prior to deciding which route is best.

A combined approach is usually the best path to provide both the company and the individual the impetus to go on and achieve more. And your accountant is likely best placed to advise you on the route to follow and the rationale behind their advice, having appraised your current situation. Together with up to date guidance on present legislation and that which might be forthcoming, they can also ensure your future tax strategies align with current UK tax laws and that you are maximising your tax efficiency in a legal and compliant manner.

Beyond our renowned ethical positioning of good governance and solid stewardship of funds, the advice we proffer at GSM is always with a mind to adding value to the growth of the business. So income and tax strategies are always advised with the pretext that there will always be more than sufficient money left in the business to grow the business and balanced with paying directors what they are worth to the company at that point in its lifecycle, yet with more than a nod to the future, so they are incentivised to do more.

This is perhaps another reason why the vast majority of our clients stay with us for the long term, additionally why we prepare the tax returns for directors of many of the companies we work with, as well as the individual tax returns for directors of larger organisations who prefer to have their personal tax affairs dealt with outside of the large accountancy firms.

To hear more of how we can unlock the optimal position for the tax affairs of your company and yourself, contact us now on 020 7935 3793.