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Profits Tied up in Your Company?

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Are you one of the many business owners who restricts salary and dividend to limit exposure to higher rates of  tax. Taking more profit out of the company would lead to further tax liability of at least 25%.

You have probably exhausted the scope for pension contribution and may be looking for other ways to save tax. Tax relief of up to 30% is available  for investments made into a Venture Capital Trust or an Enterprise Investment Scheme if the investment is held for the qualifying period – 5 years for VCT / 3 years for EIS.

Example

Taking an additional £50,000 dividend income gives rise to an additional rate tax liability of £12,500. Putting that sum into VCT or EIS would generate tax relief of £15,000.

So what would you do :

1 leave the money in the company indefinitely;
2 take out £50,000 by way of dividend and put the net £37,500 in the bank; or
3 take the dividend and put £50,000 in a VCT/EIS and still have £2,500 in cash ?

Find out how we can help you extract profits from your company. Give our team a call on 01752 205205

SWLaw Investment & Financial Planning Ltd

References :

HMRC Venture Capital Trust scheme overview
HMRC Enterprise Investment scheme : overview of EIS reliefs
British Venture Capital Association
Enterprise Investment Scheme Association

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