The Best Way to Extract Business Profit
e.g, £30,000 PROFIT - Dividend v Pension. We think pension is usually better than dividend now across all scenarios
|
£30000 Paid to You |
Dividend – paid out to you as net dividend |
Pension - £30000 Paid into Pension |
|
Corporation Tax Payable 20% |
£6,000 |
NIL |
|
Net Payment to you |
£24,000 |
£30,000 |
|
Employers National Insurance |
NIL |
NIL |
|
Employees National Insurance |
NIL |
NIL |
|
Gross Dividend figure included for Tax Return |
£26,666 (as a 10% tax credit had been added) |
NIL |
|
Money Now in Your Name BRT |
£24,000 - no further tax liability if a Basic Rate Tax Payer
In Your Pocket £24,000 |
£30,000 in pension fund
But if drawdown – new pension rules £30,000 X 25% Tax Free Cash = £7500 £22,500 X 20% Income Tax = £4,500 Tax. Net Left = £18,000
In Your Pocket £7,500 + £18,000 = £25,500 |
|
Money Now in Your Name HRT |
32.5% but 10% deemed paid so 22.5% Tax Due £26,666 X 22.5% = £5,999
In Your Pocket £24,000 - £5,999 = £18,001 |
£30,000 in pension fund
But if drawdown – new pension rules £30,000 X 25% Tax Free Cash = £7,500 £22,500 X 40% Income Tax = £9,000 Tax. Net Left = £18,000
In Your Pocket £7,500 + £18,000 = £25,500 |
|
Money Now in Your Name ART |
37.5% but 10% deemed paid so 27.5% Tax Due £26,666 X 27.5% = £7,333
In Your Pocket £24,000 - £7,333 = £16,667 |
£30,000 in pension fund
But if drawdown – new pension rules £30,000 X 25% Tax Free Cash = £7,500 £22,500 X 45% Income Tax = £10,125 Tax. Net Left = £12,375
In Your Pocket £7,500 + £12,375 = £19,875 |
|
|
|
|
|
Tax on Death E.g. Basic Rate Tax Payer |
Inheritance Tax 40% = £24,000 X 40% = £9600
Net Paid to Loved Ones £14,400 (nearly half of starting £30,000 gone in tax) |
Untouched Pension Fund = £30,000 paid to loved ones
Drawdown Pension Balance Death before Age 75 = NIL TAX Death After Age 75 = 45% then dropping to their income tax rate as they draw
Could be 100% of £30,000 never gets taxed
|
|
Tax on Death example; Higher Rate Tax Payer |
Inheritance Tax 40% = £24,000 X 40% = £9600
Net Paid to Loved Ones £14,400 (nearly half of starting £30,000 gone in tax) |
Untouched Pension Fund = £30,000 paid to loved ones
Drawdown Pension Balance Death before Age 75 = NIL TAX Death After Age 75 = 45% then dropping to their income tax rate as they draw
Could be 100% of £30,000 never gets taxed
|
|
Tax on Death E.g. Additional Rate Tax Payer |
Inheritance Tax 40% = £24,000 X 40% = £9600
Net Paid to Loved Ones £14,400 (nearly half of starting £30,000 gone in tax) |
Untouched Pension Fund = £30,000 paid to loved ones
Drawdown Pension Balance Death before Age 75 = NIL TAX Death After Age 75 = 45% then dropping to their income tax rate as they draw
Could be 100% of £30,000 never gets taxed
|