Since the introduction of Entrepreneur’s relief, the absolute best way of saving the most tax is to:
– Start a business
– Grow a business
– Take out up to £38,000 tax free (after paying 20% corporation tax)
– Sell the business
– Everything is then taxed at 10% (as long as you qualify for Entrepreneur’s relief
When I say ‘everything’, I am talking about the proceeds of the sale but also all of the accumulated profits. If you were able to live off £38,000 then ultimately all of your excess profit would be taxed at 10% over the life of the business. This beats taking out excess dividends that would be taxed at 25%.
So far so good.
However, the word on the street is that HMRC are considering taxing the accumulated profits as income meaning they will be taxed at the dividend tax rates when they are taken out the company.
So rather than paying 10% on everything, you’d pay 10% on the sale on the business but dividend tax rates on the accumulated profits which could be 32.5% or 38.1%.
Check out tomorrow’s blog for the solution….
