Saving Tax On Profits
Before you start making money, in today’s tax environment any decision about where it should go must be proactive.
The best structure for you is the one that leaves the most money in your pocket, and that depends on how much you’re going to be earning, whether you have cash in reserve, and what else you might want to do.
Despite changes to Capital Gains Tax, practices with a cash reserve can still yield a return of up to 87.5% when they incorporate.
Even though the pros and cons of creating a limited company can seem confusing, we’ve found that 91% of dentists could benefit from incorporation.
In fact, incorporation is pretty much essential for both practice owners and associates earning over £100k. With your best structure in place, we can look at ways to save tax on your money downstream, depending on what your needs are. That might be investments in lieu of a tax bill. Here’s an example.
When our interim report identified £50k surplus profits at Dr N’s practice, we wanted to know more about his plans. He didn’t need more personal funds so we looked at some speculative options which were tax efficient, so the risk was mitigated by corporate tax savings.
Since the dividend tax rate rose to 32.5% or more for higher rate taxpayers, anyone wanting to access all of their profits faces a combined tax exposure of up to 50.5%. It’s pretty clear that you are doing yourself a disservice not to explore every option to delay, defer or mitigate this money sink.
Access your wealth
If you need to access your wealth, there are ways we can help you do it efficiently, so don’t let lazy tax advisors tell you that living off the “tax sweet spot” of £100k a year is your only choice. Here’s an example.
After incorporating her practice two years ago, Dr M’s beneficial directors loan account was due to run out and the incumbent NASDAL advisor had suggested restricting withdrawals to £100k to mitigate the additional personal tax burden.
This seemed to ignore Dr M’s circumstances, as her profits were well in excess of £300k a year.
After discussions with us, she chose a tax efficient reward that allowed access to the full breadth of those profits.
Hear from our Clients
Hear from our Clients
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