Welcome to this month’s CPW newsletter, where we focus on empowering business owners with strategies to enhance their renumeration in a tax-efficient manner. As a business owner, understanding how to balance salary, dividends, and pension contributions can lead to significant tax savings and improved wealth management.
1. Smart Salary Management
Salary up to the Personal Allowance: Draw a salary of £12,570, which is tax-free under the personal allowance, ensuring you receive a steady income without incurring immediate tax liabilities.
2. Dividend Distribution
Utilising the Dividend Allowance: Benefit from the tax-free dividend allowance by drawing £500 of your dividends tax-free. The remaining £37,200 is taxed at a preferential rate of 8.75%, amounting to £3,255, which is substantially lower than the income tax rates on a similar amount of salary.
3. Maximising Pension Contributions
Leveraging Company Profits: Contribute £60,000 directly into your pension to take full advantage of tax reliefs. These contributions are treated as business expenses, thus reducing your corporation tax bill while bolstering your retirement savings without any immediate tax on the withdrawal from the business.
4. Strategic Benefits of This Approach
Tax Efficiency: Utilising both the personal allowance and dividend allowance, along with strategic pension contributions, minimises your personal and corporate tax exposure.
Enhanced Retirement Savings: Substantial pension contributions funded by company profits not only reduce your tax liability but also secure your long-term financial future.
5. Consult Professional Advice
Given the complexities of tax planning, it's advisable to consult with a financial adviser. At Cleveden Park Wealth, we specialise in creating tailored strategies that align with both your personal needs and business objectives.
At CPW, we are committed to ensuring that your business profits work as efficiently as possible for you. Our expert team is here to guide you through the nuances of financial planning, ensuring you maximise your earnings while minimising your tax liabilities.
Conclusion
Navigating the complexities of business remuneration requires careful planning and strategic execution. By understanding the interplay between salary, dividends, and pensions, you can take significant strides in optimising your financial landscape.
For personalised advice and to explore how these strategies can be tailored to your business, contact Cleveden Park Wealth today. Let us help you make the most of your hard-earned profits.
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